Conventional Cash-Out Refinance in 2026: 80% LTV Rules, Seasoning, and How It Compares to FHA and VA
FACT-CHECKEDFACT-CHECKEDA conventional cash-out refinance caps you at 80% of your home's value and typically carries no mortgage insurance at that line, while FHA matches the cap but adds premiums and VA opens the door wider. I'll walk through how the three programs compare on loan-to-value, insurance, and seasoning so you can match one to your numbers.
Key Takeaways
- Conventional cash-out tops out at 80% LTV on a one-unit primary home and typically carries no mortgage insurance.
- FHA cash-out also stops at 80% LTV, then adds a 1.75% upfront mortgage insurance premium plus an annual one.
- VA cash-out skips the 80% cap, allowing up to 100% LTV by rule, with a net tangible benefit test and a funding fee.
- Conventional seasoning needs a 12-month-old loan and six months on title, with a delayed-financing exception.
- On a $500,000 home with $300,000 owed, program choice moves proceeds and cost by five figures.
Start With Two Numbers Before You Pick a Program
When somebody calls me about a cash-out refinance, they usually open with the program they want. I open with two questions instead: what do you think your home is worth right now, and what do you still owe on it? Those two answers give me your loan-to-value ratio, or LTV, and LTV decides more about a conventional cash-out refinance than your credit score, your income, or the reason you want the money.
That 80% line in the title is the reason I start there. Freddie Mac's conforming guidelines cap a cash-out refinance on a one-unit primary residence at 80% LTV. If your home appraises at $500,000, the biggest conventional loan you can walk out with is $400,000, and every dollar of that has to cover your existing balance before any of it becomes cash in your account. Owe $300,000, and you're looking at about $100,000 before closing costs. Owe $420,000, and a conventional cash-out refinance can't help you at all, because you're already past the line. No amount of good credit changes that math.
The same 80% line carries a second meaning on a conventional loan. It's the point where private mortgage insurance, or PMI, typically stops being required. Since the cash-out ceiling sits exactly at the line where PMI falls away, a conventional cash-out refinance at that ceiling comes with no ongoing mortgage insurance after closing. Hold onto that, because the FHA and VA sections below are about what those programs charge in its place.
There's also a dollar ceiling on top of the percentage. The Federal Housing Finance Agency sets the baseline conforming loan limit for a one-unit home at $832,750, with a ceiling of $1,249,125 in designated high-cost counties. That limit applies to your total new loan amount, cash included. If your 80% figure lands above it, you've left conforming territory and the conversation changes.
I run the call this way because of how I train loan officers at AmeriSave. I own our call-scripting project, and the whole point of scripting is that a structured question gets you a structured answer. Ask about value and balance first, and the program falls out of the numbers. Ask about the program first, and you can spend twenty minutes on a loan the numbers were never going to support.
The Conventional Seasoning Clock Measures Two Different Things
Once your LTV clears, the conventional cash-out refinance requirements move to timing, and this trips up a lot of people who bought or inherited recently. Fannie Mae's Selling Guide sets two separate tests, and you'll need to pass both.
The first test is about the loan you're paying off. The existing first mortgage has to be at least 12 months old, measured from its note date, before you can refinance it into a conventional cash-out loan. Underwriting checks the note date on your current mortgage, so if you closed on a purchase or a rate-and-term refinance ten months ago, you're waiting two more months no matter how much equity you've built.
The second test is about you. At least one borrower on the new loan needs to have been on title for at least six months before the new loan's disbursement date. On a normal purchase with a mortgage, the 12-month loan test is the longer clock, so the six-month title rule rarely decides anything. It matters when you own the home free and clear.
Fannie Mae carves out an exception for exactly that situation. If you bought the home with cash, inherited it, received it through a divorce settlement or another legal award, or acquired it from a trust, the delayed-financing rule can let you take cash out without waiting the six months. The exception comes with its own documentation requirements, so if you think it applies to you, raise it with your loan officer before you count on a number.
If you're in this spot, say so upfront. I've seen files at AmeriSave where someone assumed they were stuck for a year after a cash purchase, and the delayed-financing exception was sitting right there for them. I've also seen the reverse, where someone assumed they qualified and the note date said otherwise. The clock doesn't move for anybody, and it's better to know which one you're on before the appraisal gets ordered.
FHA Cash-Out Stops at the Same 80%, Then Adds Mortgage Insurance
A lot of the conventional vs FHA cash out refinance questions I get start from an assumption that FHA lets you pull more equity. That used to be true. Under HUD's Handbook 4000.1 as it reads today, the maximum LTV on an FHA cash-out refinance is 80% of the property's adjusted value, and the combined LTV with any subordinate liens is also 80%. On a one-unit primary residence, FHA and conventional now land on exactly the same ceiling. The $500,000 home supports a $400,000 loan either way.
So the difference between the two programs moves entirely to cost. FHA charges an upfront mortgage insurance premium, or UFMIP, of 1.75% of the base loan amount. On a $400,000 loan that's $7,000.
That premium is financed into the balance rather than paid at the table, which means you're paying interest on it for as long as you hold the loan. FHA then charges an annual mortgage insurance premium, or MIP, on top of that, priced off the loan amount, term, and LTV, and collected in your monthly payment for most of the life of the loan. HUD's handbook applies that annual premium to every FHA mortgage, with only narrow exceptions for certain older streamline refinances and loans on Hawaiian Home Lands.
The gap comes down to how each program charges for insurance. Conventional mortgage insurance is a function of LTV, and at 80% you're typically under the line where it's required. FHA MIP is a feature of the program, charged whether you're at 80% or 50%. Same $400,000 loan, same $100,000 in your pocket, and one of them carries roughly $7,000 more debt on day one plus a monthly premium the other one skips.
FHA seasoning measures something different from Fannie Mae's tests, too. Conventional asks how old your loan is and how long you've held title. FHA asks how long you've lived there. You need to have owned and occupied the home as your principal residence for the 12 months before the FHA case number gets assigned, with an exception if you inherited the property. If there's a mortgage on the home already, HUD wants at least six months of payments made on it, and every mortgage on the property has to have been paid on time for the previous 12 months, or since it was opened if that's shorter. A recent late payment on your current loan can close the FHA door even when your equity is fine.
VA Cash-Out Doesn't Use the 80% Line
If you're an eligible veteran or service member, the VA cash-out refinance doesn't fit on the same 80% scale, and I'd rather explain the actual mechanics than hand you a single percentage.
Start with the ceiling. Federal regulation at 38 CFR 36.4306, and VA's Circular 26-19-05 implementing it, say VA won't guaranty a cash-out refinance with an LTV above 100% of the home's reasonable value, and that figure includes the funding fee if you finance it. If you've got full entitlement, VA.gov says there's no maximum loan amount by rule, so your ceiling comes from what the lender determines you can afford and what the appraisal supports. VA sets no fixed percentage below the 100% line. Lenders can set their own ceiling under the regulatory maximum, so the number you're offered depends on who's underwriting the file.
Then there's the net tangible benefit test. The regulation lists eight ways a VA cash-out refinance can show it actually benefits you, and the new loan has to satisfy at least one of them. Landing at or below 90% LTV is one of the eight. The others include eliminating monthly mortgage insurance, moving from an adjustable rate to a fixed rate, and lowering your interest rate or your payment. So if 90% comes up in a VA conversation, it's either a lender's own ceiling or one path through the benefit test, and neither one makes it a hard VA rule.
VA also swaps ongoing mortgage insurance for a one-time funding fee. On a cash-out refinance, VA.gov puts that fee at 2.15% of the loan amount if it's your first use of the benefit and 3.3% if you've used it before, and you can finance it into the loan.
If you receive VA compensation for a service-connected disability, you're exempt, and a few other narrow categories are exempt as well, including surviving spouses receiving Dependency and Indemnity Compensation and Purple Heart recipients serving on active duty. That exemption is a big deal in this comparison, because for an exempt veteran, VA reaches past 80% LTV without either a premium or a fee, which no other program on this list can do.
Say you're a veteran sitting in a conventional loan. The VA seasoning clock doesn't apply to you at all, because Circular 26-19-05 runs the 210-day, six-payment test only when a VA loan is being refinanced into another VA loan. If you're the one refinancing an existing VA loan into a new VA cash-out loan, the first payment on your current loan has to have come due at least 210 days before the new closing date, and you need six monthly payments behind you.
When my team works VA files, that point changes timelines. Two veterans with the same equity can sit on completely different schedules, depending on whether the loan they're paying off is a VA loan.
The Same $500,000 Home Through All Three Programs
Every borrower situation is different, so treat what follows as arithmetic on the published limits rather than a quote. Say your home appraises at $500,000 and you owe $300,000. You've got $200,000 in equity, and the question is how much of it each program lets you reach and what it charges you to reach it.
| Program | LTV ceiling on a one-unit primary home | Ongoing mortgage insurance | Upfront premium or fee | Seasoning test |
|---|---|---|---|---|
| Conventional | 80% | None required at or below 80% LTV | None | Loan at least 12 months old by note date, six months on title, delayed-financing exception |
| FHA | 80% of adjusted value | Annual MIP for most of the loan's life | 1.75% UFMIP, financeable | 12 months owner-occupancy, six months of payments, all mortgages current for 12 months |
| VA | 100% of reasonable value by rule, lenders may set a lower ceiling | None | Funding fee of 2.15% first use or 3.3% subsequent use, financeable, exemptions apply | 210 days and six payments, VA-to-VA refinances only |
Conventional at 80% gets you a $400,000 loan. Pay off the $300,000 and you're looking at roughly $100,000 before closing costs, with no mortgage insurance in the monthly payment and no premium added to the balance.
FHA at 80% of adjusted value lands on the same $400,000 base loan and the same rough $100,000 in proceeds. The 1.75% UFMIP then adds about $7,000 to what you owe, so you're carrying roughly $407,000 against $400,000 worth of payoff and proceeds. To put a monthly number on that financed premium, at the most recent Freddie Mac survey average of 6.76% for a 30-year fixed rate, financing $7,000 over 30 years runs about $45 a month and roughly $9,400 in interest over the full term, and that's before the annual MIP that also sits in your payment. Your actual rate will differ, so treat those dollars as an illustration of how a financed premium behaves.
VA changes both the loan size and the fee. Say a lender caps you at 90%. The loan is $450,000 and the proceeds are about $150,000 before costs, half again what conventional or FHA can release. The funding fee then comes off the top if you finance it: about $9,675 at the first-use rate of 2.15%, or about $14,850 at the 3.3% subsequent-use rate. If you're exempt, you keep all of it. And if a lender will go to the full 100% ceiling and the net tangible benefit test is satisfied, the loan is $500,000 and the proceeds are about $200,000 before costs and any fee.
Line those up and the program choice on this one house moves your proceeds by anywhere from zero to about $100,000 and your upfront cost by anywhere from zero to about $14,850. That's why I don't let anyone on my team at AmeriSave start a cash-out conversation with the program.
Where Conventional Wins and Where It Loses
If I'm the borrower, a conventional cash-out refinance is the answer, because I've got equity and my credit is in good shape, so I can stay at or under 80% and skip both FHA's premiums and VA's fee. That's the case where conventional wins on total cost, and it wins because of how each program charges for insurance. Conventional is the only one of the three that charges nothing for mortgage insurance at its own maximum LTV.
Now flip the file. If your credit range is thinner and a conventional lender's overlay won't approve you, FHA gets you to the exact same $400,000 loan and the same $100,000, and the price of admission is the UFMIP plus the annual MIP. In that situation the premium is buying you access to the money at all, which is a very different trade from paying it when you didn't need to. And if you're an eligible veteran who needs more than 80% of your home's value to hit your goal, or you qualify for the funding fee exemption, VA may be the only program that gets there.
None of the three programs publishes a single federal credit score floor that every lender follows. VA sets no minimum credit score by regulation and leaves it to the lender. Conventional and FHA lenders set their own overlays, and those overlays differ from lender to lender. The same goes for debt-to-income ratio, or DTI. The automated underwriting systems and each lender's rules decide what clears, and I can't give you one number that holds everywhere. What I can tell you is what the underwriter is going to look at, in sequence, and it's LTV first, then credit range, then DTI, then the seasoning clocks. If one of those doesn't fit conventional, the next question is which of the other two programs the same numbers do fit.
The Consumer Financial Protection Bureau's research on cash-out refinancing puts a number on that credit-range point. Cash-out borrowers had a median credit score of 741, against 765 for people refinancing just to change their rate or term, so the files that get done are running on solid credit and nowhere near a perfect score.
I hear a version of the same story on a lot of calls: a neighbor or a cousin got a certain loan, so that must be the one to get. Your neighbor's file is a different file. They may have more equity or less, a different credit range, and a completely different reason for wanting the money. Borrowing against your neighbor's balance sheet is how you end up in a program your own numbers never supported. Run your own value and balance, check your own credit range, and let the program come out of those.
What You Do With the Cash Changes the Tax Math
One more variable applies the same way under all three programs, and it doesn't show up on any lender's rate sheet. IRS Publication 936 treats the interest on a cash-out refinance as deductible only to the extent you use the proceeds to buy, build, or substantially improve the home securing the loan. Pay down credit cards with it, cover tuition, or fund a business, and the interest on that portion of the loan doesn't qualify for the home mortgage interest deduction, no matter which program financed it or when the original debt started.
I'll be straight with you: I'm not a tax professional, so I leave the deduction question to one. What we'll do is ask what the money is for, because the answer changes the structure of the loan, and then point you to a tax professional before you settle on an amount. If part of your plan is a kitchen and part is paying off a truck, that split is worth knowing before closing, while it can still change the loan amount.
The Bottom Line
The three cash-out programs answer the same question, how much of your home's value you can turn into cash, and each one sets its own terms on LTV, insurance, and seasoning. Conventional is the program with no mortgage insurance cost at its own 80% ceiling, FHA matches that ceiling and adds an upfront and an annual premium, and VA skips the fixed cap, charges a one-time fee that some veterans don't pay at all, and runs a seasoning clock only on a VA-to-VA refinance.
If you want the clearest path to closing, do the work in this order. Get a realistic value on the home and pull your current balance so you know your LTV. Check which seasoning clock you're on and when it runs out. Then, and only then, compare programs with your actual numbers. If anything in the mortgage insurance line, the funding fee, or the seasoning rules doesn't make sense for your file, ask before you sign anything. At AmeriSave, we'd rather answer twenty questions upfront than have one surprise show up at the closing table.
Freddie Mac, Single-Family Seller/Servicer Guide, "Maximum LTV/TLTV/HTLTV Ratio Requirements for Conforming and Super Conforming Mortgages": the 80% LTV ceiling on a conventional cash-out refinance of a one-unit primary residence.
Fannie Mae, Selling Guide B2-1.3-03, "Cash-Out Refinance Transactions": the 12-month loan-age test measured by note date, the six-month title requirement, and the delayed-financing exception.
U.S. Department of Housing and Urban Development, Single Family Housing Policy Handbook 4000.1: the FHA 80% LTV and CLTV cash-out ceiling, the 12-month occupancy and payment-history requirements, the 1.75% upfront mortgage insurance premium, and the scope of the annual MIP.
Veterans Benefits Administration, Circular 26-19-05, Cash-Out Refinance Loans: the 100% of reasonable value LTV ceiling, the eight-path net tangible benefit test, and the VA-to-VA loan seasoning rule.
38 CFR 36.4306, Refinancing of Mortgage or Other Lien Indebtedness, Legal Information Institute at Cornell Law School: the codified VA cash-out LTV ceiling and net tangible benefit test.
U.S. Department of Veterans Affairs, "VA Funding Fee and Loan Closing Costs": the 2.15% first-use and 3.3% subsequent-use cash-out funding fee rates and the exemption categories.
U.S. Department of Veterans Affairs, "VA Home Loan Limits": the absence of a maximum loan amount for veterans with full entitlement, subject to affordability and appraisal.
Federal Housing Finance Agency, "FHFA Announces Conforming Loan Limit Values for 2026": the $832,750 baseline and $1,249,125 high-cost one-unit conforming loan limits.
Internal Revenue Service, Publication 936, Home Mortgage Interest Deduction: the buy, build, or substantially improve test for cash-out proceeds and the $750,000 acquisition-debt limit.
Freddie Mac, Primary Mortgage Market Survey, week of September 10, 2026: the 6.76% average 30-year fixed rate used in the financed-premium illustration.
Consumer Financial Protection Bureau, Office of Research, "A Look at Cash-Out Refinance Mortgages and Their Borrowers Between 2013 to 2023": the median credit score figures for cash-out borrowers compared with rate-and-term refinance borrowers.
Jerrie leads sales operations in the Dallas-Fort Worth region for AmeriSave, where his entire mortgage career has been spent since being recruited into the industry at age 18. Licensed as a Mortgage Loan Originator in 37 states, he specializes in making complicated loan options accessible and helping borrowers understand what matters most in their individual situations. He brings deep regulatory knowledge and a client-centric approach honed through progression from entry-level to upper management, including successfully onboarding and training 70 people from a closed Cleveland office.
Frequently Asked Questions
On a one-unit primary residence, Freddie Mac's conforming guidelines cap a cash-out refinance at 80% loan-to-value, so your new loan, meaning your payoff plus the cash you receive, can't exceed 80% of the appraised value. The total loan also has to fit under the conforming loan limit, currently $832,750 for a one-unit home in most counties and up to $1,249,125 in designated high-cost areas.
Fannie Mae's Selling Guide runs two clocks. The mortgage you're refinancing has to be at least 12 months old, measured from its note date, and at least one borrower has to have been on title for at least six months before the new loan disburses. If you bought the home with cash, inherited it, or received it through a legal award or a trust, the delayed-financing exception can let you take cash out without waiting the six months, subject to its own documentation rules. If you've got a mortgage on the home now, the 12-month loan-age test is the longer of the two clocks.
No. HUD's Handbook 4000.1 caps an FHA cash-out refinance at 80% of the home's adjusted value, the same ceiling conventional uses on a one-unit primary residence, so on the same house both programs support the same maximum loan. The difference sits in cost. FHA adds a 1.75% upfront mortgage insurance premium that's financed into the loan, plus an annual MIP that stays in your payment for most of the loan's life, while a conventional loan at 80% LTV typically carries no mortgage insurance. FHA also requires 12 months of owner-occupancy before the case number is assigned.
Yes, but only in one situation. VA's Circular 26-19-05 applies loan seasoning to cash-out refinances that pay off an existing VA-guaranteed loan. In that case the first payment on your current loan must have come due at least 210 days before the new closing, with six monthly payments made. If you're refinancing a conventional or FHA loan into VA, that test doesn't apply.
No single number covers every lender. VA sets no minimum credit score by regulation and leaves that decision to lenders, and conventional and FHA lenders apply their own overlays on top of the program rules, so the score that clears at one lender may fall short at another. Your credit range matters most in combination with your LTV and your debt-to-income ratio, because the automated underwriting system weighs all three together. If you're unsure where you stand, ask a loan officer to run your actual numbers instead of guessing from a chart you found online.
Yes, but only on the portion you spend on the home itself. IRS Publication 936 allows the home mortgage interest deduction on cash-out proceeds you use to buy, build, or substantially improve the home securing the loan, within the acquisition-debt limit of $750,000, or $375,000 if you're married filing separately. Interest on proceeds spent on debt consolidation, tuition, or other purposes doesn't qualify, regardless of which program financed the loan. If your loan mixes uses, you'll have deductible and non-deductible portions to track. This is general tax information, so talk with a tax professional about your own return.