How much can you cash out with a conventional refinance?
On a one-unit primary residence, the new loan can generally go up to 80% of the home's value in 2026, per the Fannie Mae / Freddie Mac Selling Guides. Your rough maximum cash is that 80% figure minus whatever you still owe.
Two qualifiers matter. First, the cap moves with occupancy: second homes, investment properties, and multi-unit homes all carry lower maximums than a one-unit primary residence. I'm deliberately not printing those caps as single numbers here, because they vary by transaction in the Selling Guide eligibility matrix and I'd rather check the current matrix against your actual deal than publish a figure that goes stale. Second, the 80% line is a ceiling, not a promise: the loan is fully underwritten, so your credit, income, debt-to-income ratio, and the appraised value all have to support it. One quiet upside of the cap itself: because a conventional cash-out tops out at 80% LTV on a primary residence, the new loan typically doesn't require PMI, which kicks in above that line. The conventional loan guide covers the underwriting basics.
How does the equity math actually work?
Three numbers decide everything: what the home appraises for, what you still owe, and the 80% cap. Here's the arithmetic on a sample one-unit primary residence, computed from the 2026 cap above:
- Appraised value: $500,000, current balance: $300,000
- Total equity: $200,000 ($500,000 minus $300,000)
- Maximum new loan at 80% LTV: $400,000 (80% of $500,000)
- Maximum cash before closing costs: $100,000 ($400,000 minus the $300,000 payoff)
- Equity that stays in the home: $100,000 (the 20% the cap won't let you touch)
Notice the gap between equity and cash: this homeowner has $200,000 of equity but can pull at most $100,000, because the cap measures the whole new loan, not just the cash. Closing costs shrink the net further; they're typically financed into the new balance, which means you pay interest on them for the life of the loan. And the appraisal, not your asking price or an online estimate, sets the value the math runs on. This example is an educational illustration of the 80% arithmetic, not an offer or a quote; it deliberately shows no rate or payment, because those depend on your file and the loan you actually choose.
Cash-out vs rate-and-term: which one should you use?
Decide by the job. If the goal is a better rate or a different term and you don't need cash, a rate-and-term refinance is the cleaner tool. If the goal is pulling equity out, that's a cash-out by definition, and it costs more to do.
The differences are structural, not cosmetic. A cash-out grows your balance, so you owe more than you did yesterday; a rate-and-term keeps the debt roughly level. A cash-out generally carries tighter LTV limits and less favorable risk-based pricing adjustments under the GSEs' frameworks, because the loan is riskier to them. And one thing conventional refinancing doesn't have, in either flavor: an FHA- or VA-style streamline. Per the Fannie Mae / Freddie Mac Selling Guides, a conventional refinance is a standard, fully underwritten loan, with a full application, appraisal as required, and underwriting. The rate-and-term side of the decision, including when it makes sense and how it can remove PMI, has its own full guide at the conventional refinance page, and the broader is-refinancing-worth-it questions live in the refinance FAQ hub.
What can you use the cash for?
Anything legal: the Selling Guides don't restrict the purpose. In practice I see home renovations, a down payment on another property, education costs, a business need, and paying off other debt. The purpose doesn't change the mechanics, but it should change your thinking, because the cash is not income or a windfall. It is debt, secured by your house, repaid with interest over the life of the new loan.
The debt-payoff use deserves its own warning label, so here it is before anything else: when you pay off credit cards or personal loans with cash-out proceeds, you are converting unsecured debt into debt secured by your home. If life goes sideways, an unpaid credit card is a collections problem; an unpaid mortgage can cost you the house. There's a second trap in the term reset: rolling short-term balances into a fresh 30-year loan can mean paying more total interest over time even when the new rate is lower, because you're stretching the payoff across decades. A lower payment is not the same thing as a lower cost. That's why I don't run the should-you-do-it math on this page: the debt consolidation guide owns that decision honestly, alternatives included, and the debt consolidation calculator shows the total-interest picture either way, including when the answer is don't do it.
How does conventional cash-out compare to FHA and VA cash-out?
All three pull equity out as a new, larger first mortgage; they differ in caps, mortgage insurance, and who can use them. The short version of each, with the full mechanics living on their own pages:
FHA cash-out is the government-insured route, and its defining tradeoff is mortgage insurance: an FHA loan carries MIP, including an upfront premium, where a conventional cash-out at 80% LTV or below typically carries no PMI. FHA's flexibility on credit can make it the workable path for some borrowers anyway; the caps, occupancy rules, and MIP details live in the FHA cash-out refinance guide.
VA cash-out is for eligible veterans and service members, and it's the one program that can reach higher loan-to-value territory than conventional allows, with no monthly mortgage insurance but a funding fee for most borrowers. If you're VA-eligible, compare it before defaulting to conventional; the eligibility, LTV, and funding-fee mechanics live in the VA cash-out refinance guide.
Conventional cash-out is the broadest-access option of the three: no military service requirement, no government mortgage insurance, and it's the only one of the three available for second homes and investment properties, at those lower occupancy-specific caps. For strong-credit borrowers at moderate LTVs, it's often the structure the math favors, but "often" is doing real work in that sentence, which is why the right answer is a side-by-side on your actual numbers.