What is loan-to-value?
Loan-to-value, or LTV, compares the loan to the home's value. If a lender lets the new loan be 80 percent of the home's value, the maximum loan is 80 percent of that value. Every cash-out calculation starts with that limit.
How do I figure out my cash?
There are three steps. First, find your home's value, which an appraisal confirms. Second, apply the program's limit to get the maximum new loan. Third, subtract what you owe on your current mortgage, plus closing costs. What remains is your cash.
The more equity you have, the more room there is. A homeowner who owes little compared with the home's value usually has the most cash available.
What limits do the programs commonly use?
- Conventional: commonly up to around 80 percent of value on a primary home, depending on the program.
- FHA: commonly around 80 percent of value for cash-out as well.
- VA: can go higher for eligible veterans, depending on the lender.
- DSCR and other investor loans: cash-out limits are usually lower than on a primary home, depending on the program.
These are commonly cited figures, not guarantees. Lenders can set stricter limits, and the numbers can differ by property type and credit profile.
Does Texas work differently?
Yes. Texas homestead property has its own limit under the state constitution: the total of all loans against the home generally can't go above 80 percent of its value. There are also waiting-period rules, so I walk Texas homeowners through the specifics. If you're in Texas, tell me early.
What does it look like in real life?
Picture a homeowner who owes well under what the home is worth. We apply the program's limit to the value, subtract the current balance and the closing costs, and the remainder is the cash. If that amount is more than they need, they can simply take less. A cash-out refinance doesn't have to use every dollar of available equity.
Can I take less than the maximum?
Absolutely. The maximum is a ceiling, not a target. Many homeowners borrow only what their project or payoff requires, and keeping the new loan smaller leaves more of their equity untouched.
Where I come in
I'm Danny Granger, NMLS #920614, sponsored by Lumin Lending, NMLS #2716106, licensed in 18 states. I shop over 100 wholesale lenders, so I can find which program gives your situation the most room. See the cash-out refinance overview, compare it with a second mortgage, HELOC, or HEI, or run figures in the calculators. Send me your address and balance and I'll lay out the numbers, the likely program, and what closing would look like, so you can decide with the full picture.
