Cash-Out Refinance: How Much Equity Can You Actually Take?

TL;DR: Most conventional lenders cap a cash-out refinance at 80% loan-to-value, meaning you must keep at least 20% equity in the home. On a $400,000 house with a $200,000 balance, that typically means access to roughly $120,000, minus closing costs of 2-6% of the new loan. VA loans allow up to 100% LTV in some cases, while FHA caps out at 80%.

_Last reviewed: August 2026 · 7 min read_

You've built up equity for years and now need cash for a renovation, medical bill, or debt payoff, but every lender quote seems to pull a different number out of the air. The math behind a cash-out refinance is actually fixed by rule, not lender mood, and once you know the formula you can calculate your own number in five minutes.

Okoniq Property Hub tracks your mortgage balance, home value estimates, and equity position over time, so you're not guessing where you stand before you talk to a lender.

How much equity can you actually pull out?

Most lenders will not let your new loan exceed 80% of your home's appraised value on a conventional cash-out refinance. That 20% cushion protects the lender if home prices drop and protects you from being underwater the moment you close.

Here's the formula: take your home's appraised value, multiply by 0.80, then subtract your current mortgage balance. On a home appraised at $450,000 with a $250,000 balance, the max new loan is $360,000 (450,000 × 0.80), leaving $110,000 before closing costs. That $110,000 isn't what lands in your account, though. Closing costs on a cash-out refi typically run 2% to 6% of the loan amount, so on that $360,000 loan you might lose $7,200 to $21,600 before the rest hits your bank account.

VA loans are the exception. Eligible veterans can sometimes refinance up to 100% of the home's value, though most lenders still hold the line closer to 90% for cash-out specifically. If you're a veteran weighing this option, VA loan basics covers eligibility and funding fee details worth knowing before you apply.

Does your credit score and loan type change the ceiling?

Yes, and the gap between loan types is bigger than most homeowners expect. Conventional loans back by Fannie Mae or Freddie Mac generally cap cash-out at 80% LTV for a primary residence, but that drops to 75% or lower for investment properties and second homes.

FHA cash-out refinances allow up to 80% LTV as well, but they come with upfront and annual mortgage insurance premiums that conventional loans skip once you're under 80% LTV. If PMI removal timing matters to your decision, how PMI works and when it drops is worth a read before you refinance into a loan that reintroduces mortgage insurance you'd already shed.

Credit score also moves the needle, not on the LTV cap itself but on the rate you're offered at that LTV. A borrower with a 760 credit score and 75% LTV will see a noticeably better rate than one with a 680 score at the same LTV, sometimes a full percentage point apart. That rate gap can matter more to your monthly payment than the extra equity you're accessing.

What does a cash-out refi actually cost compared to a HELOC?

A cash-out refinance replaces your entire mortgage, while a HELOC sits on top of it as a second lien, and that difference drives very different cost structures. Refinancing means new closing costs on the full loan amount, typically $6,000 to $15,000 on a $300,000 loan, plus you reset your amortization clock and possibly lose a lower rate you already had locked in.

| | Cash-Out Refinance | HELOC | |---|---|---| | Closing costs | 2-6% of new loan | Often $0-$500 | | Rate | Fixed, new full-balance rate | Usually variable | | Existing rate impact | Replaces your current rate | Leaves current rate untouched | | Best for | Large, one-time cash need | Flexible, ongoing access |

If your current mortgage rate is well below today's market rate, refinancing the entire balance just to access equity can cost you more in the long run than borrowing against a HELOC. A full side-by-side breakdown lives in HELOC vs cash-out refinance, and if you want the loan-versus-line-of-credit distinction spelled out further, home equity loan vs HELOC covers that too.

Is it worth doing the math before you commit?

Yes, and the calculation takes less time than most people spend comparing lender ads. Before signing anything, run your own break-even number: divide your total closing costs by your monthly savings or cash benefit to see how many months until the refinance pays for itself. If you're not staying in the home past that break-even point, the refinance likely isn't worth it.

The refinance break-even calculator walks through this in under a minute, and if you know you might move soon, should I refinance if I'll move in 3 years? tackles that exact scenario. It's also worth checking your current loan for a prepayment penalty before you refinance out of it. What to check in your loan explains where that fee typically hides in the fine print.

FAQ

How soon after buying a house can I do a cash-out refinance?

Most lenders require you to own the home for at least 6 months before a cash-out refinance, sometimes 12 months for certain loan programs, regardless of how much equity you've built.

Does a cash-out refinance count as taxable income?

No, the cash you receive is loan proceeds, not income, so it isn't taxed. Talk to a CPA if you're using the funds for home improvements, since the interest may remain deductible under IRS rules for acquisition debt.

Can I do a cash-out refinance with less than 20% equity?

Generally no for conventional loans, since the 80% LTV cap is a hard line for most lenders. FHA and VA programs have different thresholds, so it's worth asking a loan officer about program-specific minimums.

How much does a cash-out refinance actually cost in fees?

Expect 2% to 6% of the new loan amount in closing costs, covering the appraisal, title work, origination fees, and recording costs. On a $300,000 loan that's roughly $6,000 to $18,000.

Will a cash-out refinance change my monthly payment?

Almost always, because you're borrowing more and often resetting to a new interest rate and term. Comparing your old amortization schedule to the new one, as explained in your amortization schedule, explained, shows exactly how the new payment breaks down.

This is educational information, not financial advice. Talk to a mortgage loan officer and a CPA about how a cash-out refinance fits your specific tax and financial situation.