How it works
A single new first mortgage pays off the old one and any junior liens, and the remainder comes to you at closing. Because it is a first lien, pricing beats a second mortgage — but you give up whatever rate you had, which is why this fell out of favor when rates rose.
A homeowner has a $250,000 mortgage on a $600,000 home and wants $100,000. A cash-out refinance replaces the first mortgage with a larger new loan; whether that is smart depends heavily on the existing first-mortgage rate and total cost.
Who it can work well for
Owners whose existing rate is at or above current market, borrowers consolidating significant debt, and investors pulling equity out to buy the next property.
What lenders actually look at
Lenders evaluate value, requested new balance/LTV, credit, income/DTI, occupancy, property type, title/seasoning and the purpose of funds where relevant.
Illustrative lender guidelines
These are educational examples, not universal approval rules. Exact requirements and maximum leverage vary by lender and complete scenario.
| Scenario | Credit / qualifier | Illustrative leverage |
|---|---|---|
| Primary, conventional | 620+ | 80% |
| Primary, FHA | 580+ | 80% |
| Primary, VA | 620+ typical | 90% |
| Second home | 680+ | 75% |
| Investment property | 680+ | 75% |
| Investment, DSCR | 680+ | 75% |
What to watch for
Compare the blended cost against a second lien before you do this. Replacing a 3% first mortgage to access equity is almost always the wrong move — a HELOC or fixed second usually wins.
Common misconception: the maximum cash available equals home value minus mortgage balance. LTV limits, closing costs, liens and program rules determine usable proceeds.
When this may not be the best choice
It may not be best when the existing first mortgage is exceptionally favorable and a HELOC/fixed second can access the needed amount without repricing the entire debt.
Common questions
Related programs
Want to see what may fit your scenario?
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