What Is the Maximum LTV on a Conventional Cash Out Refinance?

At Freedom Mortgage, the maximum loan-to-value ratio for a Conventional cash out refinance is 80%. This means that your LTV can be no higher than 80% if you want to qualify for cash out refinancing with a Conventional loan.

What Is the Maximum LTV on a VA Cash Out Refinance?

At Freedom Mortgage, Veterans, active-duty military personnel, and surviving spouses with VA loans may qualify for VA cash out refinancing with a 90% maximum loan-to-value ratio.

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Cash Out Refinance Loan-to-Value (LTV): A Guide

Q: What Is a Maximum Loan-to-Value Ratio (LTV)?

The maximum loan-to-value ratio (LTV) of a cash out refinance is important, because it affects whether or not you’ll qualify for refinancing, as well as how much money you may be able to borrow from your home’s equity. LTV is a percentage that’s calculated as follows: Your current mortgage loan ÷ appraised value of the home = your loan-to-value ratio. For example, if your current mortgage balance is $150,000, and your home is worth $300,000, then your loan-to-value ratio is 50%. (That is $150,000 ÷ $300,000 = 0.50 or 50%.)

Learn Why Your Cash Out Refinance Loan-to-Value (LTV) Matters

A cash out refinance allows homeowners to apply for a larger mortgage to replace their current loan and receive the difference in cash. Cash out refinances are common among owners looking to fund home improvement projects, consolidate debts, or fulfill financial responsibilities.

A homeowner's loan-to-value (LTV) ratio is a key metric to evaluate risk in refinances and home purchases. This percentage is found by comparing your home's estimated value to the amount mortgaged against it. In this guide, we'll explain how cash out refinances work, the maximum LTV limits that apply, and how they're calculated.

What Is a Maximum Loan-to-Value Ratio?

A maximum loan-to-value ratio is the highest percentage of your home's appraised value that you're permitted to borrow based on a loan program's terms and lending restrictions. This limit allows you to determine whether you'll qualify for refinancing. It also affects how much money you'll be able to borrow from your home's equity. LTV is a percentage that's calculated as follows:

Your current mortgage loan ÷ appraised value of the home = your loan-to-value ratio

Different loan types have different maximum LTV requirements for cash out refinances. Use our cash out refinance calculator to estimate how much cash you'll receive based on your home's current value and loan balance.

Maximum LTV for Cash Out Refinance Loans

The maximum LTV for a cash out refinance varies depending on the type of loan and lender you choose. Conventional, FHA, and VA loans each have their own unique set of restrictions, and lenders will set their own limits within these guidelines, so it's important to understand the details of your selected loan program before applying.

Conventional Cash Out Refinance LTV

The maximum loan-to-value ratio for a conventional cash out refinance is 80% at Freedom Mortgage. This means that your LTV can be no higher than 80% if you want to qualify for cash out refinancing with a conventional loan. This specific limit requires homeowners to retain at least 20% of their home equity after refinancing, which is a common standard for conventional cash-out refinances . Here is a sample calculation:

Home value	$275,000
Current mortgage balance	$125,000
Sample maximum LTV	0.80 (or 80%)
Maximum new mortgage balance	$220,000 ($275,000 x 0.8)
Maximum cash available	$95,000 ($220,000 - $125,000)

The homeowner in this example may qualify for a cash out refinance for up to $95,000 in cash. Keep in mind that you'll need to meet other credit, income, and financial requirements for your refi to be approved.

FHA Cash Out Refinance Max LTV

At Freedom Mortgage, the maximum loan-to-value ratio for an FHA cash out refinance is 80% of a home's appraised value, meaning your home's new loan can't exceed 80% of its worth. This limit applies to the new loan amount after refinancing, not just the cash you'll receive.

As you would with conventional loans, you'll also need to meet credit, income, and financial requirements for your FHA cash out refinance application to be approved. Knowing your home's LTV can ensure there's enough equity left in the home after the cash out refinance is completed, while staying compliant with FHA refinance requirements. Keeping your LTV within this threshold can help build a stronger application and improve underwriting outcomes.

VA Cash Out Refinance Max LTV

Veterans, active-duty military personnel, and surviving spouses may qualify for VA cash out refinancing from Freedom Mortgage with a 90% maximum loan-to-value ratio. Let's look at the same sample homeowner as above with a 90% maximum LTV:

Home value	$275,000
Current mortgage balance	$125,000
Sample maximum LTV	0.90 (or 90%)
Maximum new mortgage balance	$247,500 ($275,000 x 0.9)
Maximum cash available	$122,500 ($247,500 - $125,000)

The VA homeowner in this example might be eligible to receive up to $122,500 in cash after refinancing—more than they could get with a conventional or FHA cash out. Most VA homeowners will need to pay a VA funding fee as part of their closing costs when refinancing. Plus, they will need to meet credit, income, and financial requirements to get their loan approved.

How LTV Impacts Your Refi Interest Rate

A lower LTV means you're borrowing a smaller portion of your home's value, signaling lower risk to lenders. Because the loan represents a smaller portion of the property's value, lenders are able to offer more competitive rates and favorable loan terms. A high credit score and strong financial background can further strengthen an application overall, especially when paired with a low LTV.

On the other hand, higher LTV's tend to come with higher interest rates since lenders take on greater risk with a larger portion of the home's value. Check your home's loan balance to see where your LTV stands, and how it may influence your refinance options.

Cash Out Refinance LTV FAQs

Here are some frequently asked questions on cash out refinance loan-to-value ratios.

Can I Get a 100% LTV Cash Out Refinance?

Loan-to-value ratios up to 100% for refinances are possible, but rare. Most lenders limit maximum percentages to 90%, and these types of refinances are typically only available with VA loans.

Are Closing Costs Included in My Cash Out Refinance LTV?

Closing costs can be included (or “rolled”) into refinance LTV's and usually range anywhere from 3%-5% of the total loan. If you opt to include them, these costs will be added to the loan, which increases the LTV ratio and reduces the amount of cash you'll receive.

What Is the Maximum LTV for a Cash Out Refi on an Investment Property?

Although they can vary by lender, maximum cash out LTVs for refinances of investment properties usually cap around 75%.

Final Thoughts: Cash Out Refinance LTV

A loan-to-value ratio helps buyers determine if they qualify for a cash out refi, and how much they'll be able to borrow. Lower LTV's signal less risk for lending money, while higher ratios suggest a greater chance of mortgage default.

No matter what loan program or what lender you choose, your cash out refinance LTV can influence interest rates and your overall borrowing power. Since maximum LTV limits can vary by lender across VA, FHA, and conventional loans, it's important to understand which option makes the most sense for your circumstances.

Take a look at your home's loan balance and appraised value to get a sense of what a cash out refinance would look like for you. From here, you can explore the loan options that suit your situation the best. If you're ready to take this step, get started on a cash out refinance today, and see how you can achieve your financial goals and save money.