Refinance & Cash-Out

A conventional cash-out caps at 80% LTV for a one-unit primary residence, 75% for a 2-4 unit primary or a one-unit second home, 75% for a one-unit investment property, and 70% for a 2-4 unit investment. Minimum credit score is 620, or 660 above 75% LTV. (Source: Fannie Mae Eligibility Matrix; B2-1.3-03)

FHA cash-out caps at 80% of appraised value and wants 12 months of ownership and occupancy, but it adds mortgage insurance. VA cash-out allows up to 100% LTV, though most lenders cap at 90%, with no PMI and a funding fee of 2.15% first use or 3.3% after, waived for veterans with a service-connected disability. (Source: HUD 4000.1; VA funding fee charts)

For a conventional cash-out, your first mortgage has to be at least 12 months old, and at least one borrower needs to be on title for 6 months. Exceptions apply for inherited or legally awarded property. FHA requires 12 months, and VA requires 210 days plus 6 payments. (Source: Fannie Mae B2-1.3-03)

Divide your total closing costs by your monthly savings. For example, $5,000 in costs and $250 a month saved breaks even in 20 months. If you'll sell or refinance again before you hit break-even, a refi likely costs you more than it saves. Run your own break-even here. That example is illustrative, not a quote. (Source: CFPB)

No. The lender either rolls the costs into your balance or charges you a higher rate. It removes the upfront cash but you pay over time. It can still make sense if you'll move soon or want to keep cash on hand. Compare the total interest against a traditional refi. (Source: industry analysis)

Possibly. Conventional PMI auto-terminates at 78% LTV of the original value, and you can request cancellation at 80%, under the Homeowners Protection Act. If your home appreciated, refinancing below 80% LTV can drop PMI sooner, so weigh the closing costs against the savings. FHA MIP often requires a refinance to remove. (Source: CFPB; Homeowners Protection Act)

It can lower your blended rate, like swapping 20%+ credit-card debt for a roughly 6-7% mortgage rate in one example. But it's a cash-out refi capped at 80% LTV, it adds closing costs, and it turns unsecured debt into debt secured by your home. Run the total-interest math, not just the monthly payment. (Source: industry analysis; Fannie Mae B2-1.3-03)

Generally no. Cash-out proceeds are loan proceeds, not income, so they aren't taxed. Whether the interest is deductible depends on how you use the funds. Tax rules are individual, so talk to a tax professional before you count on any deduction. (Source: industry guidance; confirm with a tax professional)

Yes. The proceeds can be used for any purpose, including a down payment on another property. On your primary residence you can access up to 80% LTV. Refinancing an investment property itself caps lower, at 75% for one-unit or 70% for 2-4 unit. (Source: Fannie Mae Eligibility Matrix)

Per Fannie Mae SEL-2025-08, the limited cash-out cash-back limit is the greater of 1% of the new loan's unpaid balance or $2,000. That's raised from the prior rule, the lesser of 2% or $2,000. Go over it and the loan gets reclassified as cash-out, with stricter LTV and pricing. (Source: Fannie Mae B2-1.3-02)

Your max loan is the LTV cap times the appraised value, so a low appraisal directly cuts your available cash. Cash-out refinances require a full appraisal. For example, an 80% cap on a $400,000 appraisal allows a $320,000 loan. (Source: Fannie Mae B2-1.3-03)

When you'll sell before break-even, when stretching your term erases the savings, when closing costs outweigh the benefit, or when a cash-out needlessly turns low-interest unsecured debt into long-term mortgage debt. Refinancing also restarts your amortization clock, so the monthly drop can still cost you more over time. (Source: CFPB; industry analysis)