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:
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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This content is for informational purposes only and not a commitment to lend. Loan terms, rates, and approval depend on credit, underwriting, and investor guidelines.
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