A conventional cash-out refinance is a new Fannie Mae or Freddie Mac loan that pays off your current mortgage and gives you the difference in cash. It's the most widely used cash-out option because it works on primary homes, second homes and rentals, and it carries no mortgage insurance at the allowed loan-to-value levels.
Maximum loan-to-value
| Occupancy | Units | Max LTV / combined LTV |
|---|---|---|
| Primary residence | 1 | 80% |
| Primary residence | 2–4 | 75% |
| Second home | 1 | 75% |
| Investment property | 1 | 75% |
| Investment property | 2–4 | 70% |
Fannie Mae's Eligibility Matrix and Freddie Mac's Guide section 4203.1 use the same limits for standard loans. If you keep a second loan such as a HELOC in place, the combined total still has to fit under the limit.
Worked example
| Amount | |
|---|---|
| Appraised value | $500,000 |
| Maximum loan at 80% | $400,000 |
| Current mortgage payoff | $250,000 |
| Cash before closing costs | $150,000 |
| Example closing costs | $8,000 |
| Estimated cash to you | $142,000 |
| Principal & interest at an example 6.75%, 30 years | about $2,594/month |
Seasoning and title rules
- The first mortgage being paid off must be at least 12 months old, measured from its note date to the new loan's note date. This doesn't apply to second liens being paid off.
- At least one borrower must have been on title for 6 months before the loan funds. Exceptions include inherited property, property awarded in a divorce or separation, and delayed financing after a cash purchase.
- Time the property was owned by your LLC or trust can count if the entity meets Fannie Mae's rules.
- The home must be off the market by the date the loan funds.
Credit and pricing
Lenders set minimum credit scores for loans approved through Fannie Mae's and Freddie Mac's automated systems. For manually underwritten one-unit primary homes, Fannie Mae's matrix requires 640 to 700 depending on LTV, debt-to-income and reserves.
Cash-out loans carry extra loan-level pricing adjustments, so they usually price a bit higher than a refinance with no cash out. The adjustment is larger at higher LTVs and lower credit scores — taking out slightly less cash (say, 75% instead of 80%) can sometimes improve the rate.
Loan size limits
A conventional loan has to fit under your county's conforming limit. Many Colorado mountain counties have higher limits — see Colorado loan limits and Florida loan limits. For anything larger, look at a jumbo cash-out refinance.
Second homes and rentals
On a second home, the limit is 75% and the home must be a single unit. On rentals, the limit is 75% for one unit and 70% for two to four units, and you qualify with your personal income and debt-to-income ratio. If your tax returns don't show enough income, a DSCR cash-out qualifies the property on its rent instead. See also Colorado investment property cash-out and Florida investment property cash-out.
Conventional vs. FHA cash-out
Both allow 80% on a primary home. Conventional has no mortgage insurance at 80% and works on any occupancy type. FHA charges upfront and annual mortgage insurance but has more flexible credit rules. Compare them in our FHA cash-out guide or run both through the calculator.
Frequently asked questions
What is the maximum LTV for a conventional cash-out refinance?+
80% on a one-unit primary home, 75% on a two- to four-unit primary home or a second home, and 75% (one unit) or 70% (two to four units) on an investment property.
Does a conventional cash-out refinance require PMI?+
No. Because conventional cash-outs are capped at 80% loan-to-value or lower, private mortgage insurance isn't required.
How long do I have to wait to do a conventional cash-out?+
The mortgage you're paying off must be at least 12 months old, and a borrower must have been on title for at least 6 months, with exceptions for inheritance, divorce awards and delayed financing.
Can I take cash out of a second home?+
Yes. Conventional loans allow a cash-out refinance on a one-unit second home up to 75% of the appraised value.