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Cash out limits for most mortgage loans

Cash-Out Refinance Guidelines

Home Equity

Using a cash-out refinance to access the equity in your home can contribute to both your ability to build wealth, and create peace of mind.

One of the greatest benefits of homeownership is the forced savings vehicle that is constantly building wealth for you and your family.

As a homeowner, you are paying down your loan every month that you make your mortgage payment.  In addition to paying down your loan each month, you are also benefiting from your home’s value increasing.

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Home values can drop in rare cases, like what we saw in late 2007.  However, in the past 10 years home values have risen back to the nearly all time levels prior to the crash.

Most homeowners that purchased after the crash are now benefiting from an increase in equity, and may now be in a position to leverage this equity to reduce monthly payments, do home improvements, remove mortgage insurance, or invest in another home.

Loan to Value Limits

The maximum loan you can qualify for as a percentage of the value of your home is called your Loan to Value (LTV).  If you have a second mortgage or HELOC, both your first and second (or third) loans combined is called your Combined Loan to Value (CLTV).

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When you are simply trying to reduce the interest rate or term of your loan, this is called a rate and term refinance.  The loan to value and combined loan to value guidelines are the same for rate and term refinance as they are with purchase money loans.

Taking equity out of your home will limit the LTV and CLTV, and in most cases will require increased closing costs.  While taking equity out of your home is allowed under these more strict guidelines, you could say that it is discouraged through higher rates and fees in some cases.

You will mostly see an increase in cash-out refinance restrictions when you have a higher loan to value.

Fannie Mae Cash-Out LTV/CLTV Limits

Fannie Mae loans are considered Conventional financing.  Conventional loan limits were last updated in 2017.

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Primary Residence

  • 1 Unit – Fixed Rate: 80% LTV/CLTV / Adjustable Rate: 75% LTV/CLTV
  • 2-4 Units – Fixed Rate: 75% LTV/CLTV / Adjustable Rate: 75% LTV/CLTV

Second Home

  • 1 Unit – Fixed Rate: 75% Loan to Value / Adjustable Rate: 65% Loan to Value

Investment Property

  • 1 Unit – Fixed Rate: 75% Loan to Value / Adjustable Rate: 65% Loan to Value
  • 2-4 Units – Fixed Rate: 70% Loan to Value / Adjustable Rate: 60% Loan to Value

Freddie Mac Cash-Out LTV/CLTV Limits

Freddie Mac loans are considered Conventional financing.  Conventional loan limits were last updated in 2017.

Primary Residence or Second Home

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  • 1-2 Unit – Fixed Rate/ARM: 75% LTV / with 2nd Mortgage 70% LTV
  • 1-2 Unit – Fixed Rate/ARM: 75% CLTV / with 2nd Mortgage 75% CLTV
  • 3-4 Unit – Fixed Rate/ARM: 75% LTV / with 2nd Mortgage 70% LTV
  • 3-4 Unit – Fixed Rate/ARM: 75% CLTV / with 2nd Mortgage 75% CLTV

Investment Property

  • 1-2 Unit – Fixed Rate/ARM: 75% LTV / with 2nd Mortgage 70% LTV
  • 1-2 Unit – Fixed Rate/ARM: 75% CLTV / with 2nd Mortgage 75% CLTV
  • 3-4 Unit – Fixed Rate/ARM: 70% LTV / with 2nd Mortgage 65% LTV
  • 3-4 Unit – Fixed Rate/ARM: 70% CLTV / with 2nd Mortgage 75% CLTV

FHA Cash-Out LTV/CLTV Limits

FHA loans are Government insured, and require mortgage insurance.  FHA loan limits were last updated in 2017 will vary by County. FHA cash-out refinance loans can only be taken out on owner occupied homes.

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  • 1-4 Units – 85% LTV/CLTV

VA Cash-Out LTV/CLTV Limits

VA loans are guaranteed by the Veteran’s Administration. VA loan limits were last updated in 2017 will vary by County. FHA cash-out refinance loans can only be taken out on owner occupied homes.

VA loans also require a Guarantee Fee that can be financed into the loan amount.  The Guarantee fee on a cash-out refinance is much higher than when you purchased your home using your home loan benefit.  Disabled Veterans may have this fee waived.

  • 1-4 Units – 100% LTV/CLTV

Cash-Out Refinance Questions Answered

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About Your Expert

Scott Schang

As a 19 year veteran of the Mortgage and Real Estate industry, I am passionate about educating and empowering consumers. I have been writing about consumer protection issues, and making sense of complicated real estate and mortgage topics on this website since 2007

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