A cash-out refinance replaces your existing mortgage with a bigger one and hands you the difference in cash — but lenders don't let you tap all of your equity. Here's the math that actually sets the ceiling.
The 80% Loan-to-Value Ceiling
Most conventional lenders cap a cash-out refinance at 80% of your home's appraised value. That means the new loan amount — your existing balance plus the cash you take out — can't exceed 80% of what the home is worth. Anything above that line stays locked as equity you can't access through this product.
Worked Examples
| Home Value | Current Balance | 80% LTV Cap | Approx. Cash Available |
|---|---|---|---|
| $300,000 | $180,000 | $240,000 | ~$60,000 |
| $400,000 | $250,000 | $320,000 | ~$70,000 |
| $500,000 | $220,000 | $400,000 | ~$180,000 |
The formula: (Home Value × 80%) − Current Mortgage Balance = Approximate Cash Available, before closing costs. Closing costs on a cash-out refinance typically run 2–5% of the new loan amount and are usually rolled into the loan rather than paid out of pocket.
What Can Push the Cap Lower
- Credit score. Lower scores sometimes come with a lower maximum LTV, not just a higher rate.
- Loan type. FHA cash-out refinances typically cap at 80% LTV as well, but VA cash-out refinances can go up to 90–100% for eligible borrowers.
- Debt-to-income ratio. A high DTI can limit the loan amount a lender approves even if the LTV math allows for more.
Source: Standard conventional/FHA 80% cash-out refinance LTV ceiling; VA cash-out refinances can extend further per VA program guidelines. Figures are illustrative estimates, not quotes.
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