Cash-out refinance
A cash-out refinance replaces your mortgage with a bigger one and pays you the difference in cash. You keep one loan payment, but your balance goes up and you pay full closing costs on the whole new loan.
Official limits
- FHA: up to 80% of the home's value, only on the home you live in, per HUD Mortgagee Letter 2019-11.
- VA: eligible veterans can refinance up to the limits VA describes, and the VA funding fee is 2.15% for first use and 3.3% after first use, unless you are exempt.
- Fannie Mae: at least one borrower must be on title for six months, and the loan being paid off must be at least 12 months old. The maximum loan to value is set in Fannie Mae's eligibility matrix.
Before you choose cash-out
- Compare it with a home equity loan or HELOC, which leave your first mortgage and its rate in place.
- If your current rate is lower than today's rates, replacing the whole loan can cost more than borrowing only the extra amount.
- Your home secures the loan. Missing payments can lead to foreclosure.
Questions people ask
- Is cash-out refinance money taxed?
- Loan proceeds are borrowed money, not income. How interest can be deducted depends on how you use the money. Ask a tax professional.
- Can I do a cash-out refinance on a rental property?
- Some programs allow it, with stricter limits than for the home you live in. FHA and VA cash-out refinances are for the home you live in.
- Is there a right to cancel?
- Yes, for most cash-out refinances of the home you live in, you have until midnight of the third business day after closing to cancel in writing.
Official sources
- HUD Mortgagee Letter 2019-11, FHA cash-out refinance limits ↗
- VA, Cash-out refinance loan ↗
- VA, Funding fee and closing costs ↗
- Fannie Mae Selling Guide B2-1.3-03, cash-out refinance transactions ↗
- CFPB, Regulation Z section 1026.23, right of rescission ↗
Facts checked 2026-11-01. General information, not financial, legal or tax advice. We are not a lender.