A Conventional Cash-Out Refinance allows a homeowner to replace their existing mortgage with a new, larger conventional (non-government) loan and receive the difference in cash. It’s one of the most common ways to tap into your home’s equity while rolling that equity into a new loan.
How Conventional Cash-Out Refinance Works
- Appraisal & value determination – The lender orders an appraisal to find your home’s market value.
- Set new loan amount – You can usually borrow up to 80% of the home’s appraised value.
- Pay off old mortgage – Your new loan pays off the existing mortgage balance.
- Cash in hand – You receive the difference after paying off the old loan and closing costs.
- New loan terms – Your new mortgage has its own interest rate and term.
→ Read more: Home Loan Refinance: Is Now the Right Time for You to Check Your Rate?
Key Requirements of Conventional Cash-Out Refinance
- Loan-to-Value (LTV): Up to 80% for most conventional cash-out refinances.
- Credit Score: Minimum 620; stronger credit gets better rates.
- Debt-to-Income (DTI): Typically must be under 43–50%.
- Seasoning: You must usually own and live in the home at least 12 months.
- Closing Costs: 2–6% of the loan amount.
→ Read more: Cash-Out Refinance: A Complete Guide for Consumers
Pros and Cons
Advantages
- Access large sums of cash for any purpose
- Consolidate debt at lower interest rates
- Combine your mortgage and cash needs into one loan
- Potentially lower interest than credit cards or personal loans
Disadvantages
- Higher monthly payments (loan balance is bigger)
- Less equity left in the home (reduces your safety net)
- Closing costs can reduce net cash received
- Higher risk: if you miss payments, your home is collateral
Conventional vs. Government Cash-Out Programs
Feature | Conventional Cash-Out | FHA Cash-Out | VA Cash-Out | USDA (No Cash-Out) |
| Max LTV | Up to 80% | Up to 80% | Up to 90–100% | Not allowed |
| Credit Score | 620+ | 580+ | Flexible (lender sets) | N/A |
| Mortgage Insurance | PMI if LTV > 80% (but most cap at 80%) | MIP required | No PMI | N/A |
| Who Qualifies | Any borrower | Anyone eligible for FHA | Veterans, service members, spouses | Low/moderate-income, rural |
| Loan Use | Cash for any purpose | Cash for any purpose | Cash or refinance into VA | Only streamline rate refi |
| Occupancy | Primary residence, second home, or investment | Primary residence only | Primary residence only | Primary residence only |
Highlights:
- Conventional Cash-Out is great for borrowers with good credit and equity, even for investment properties.
- FHA Cash-Out works for those with lower credit but requires mortgage insurance.
- VA Cash-Out offers the most flexibility (up to 100% LTV, no PMI), but only for veterans and service members.
- USDA does not offer cash-out; only streamlined refinances.
→ Read more: Refinance Mortgage Broker Near Me
Why Choose Loan Factory for Cash-Out Refinance?
At Loan Factory, we simplify the refinance process so you can unlock your home equity with confidence:
- Best Price Guarantee – If we can’t beat a competitor’s offer, we’ll pay you $1,000 cash.(term)
- Advanced Technology (MOSO) – Instantly compare 240+ lenders and lock in the best deal.
- Transparent Fees – No junk charges, no hidden surprises.
- Expert Support – Our loan officers guide you step-by-step, whether it’s conventional or VA/FHA cash-out.
Ready to turn your equity into cash? Start your Cash-Out Refinance with Loan Factory today.
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