What is the maximum cash out refinance formula?

Here’s the maximum cash-out amount formula:

Your property value x LTV limit - current mortgage balance = the maximum you can cash out

The LTV limit (known as the loan-to-value ratio limit) for a single-family property is 80%. That means you need to keep a minimum of 20% equity in your home when you do a cash-out refinance. However, the type of property and the number of units the property has can reduce the LTV limit to as low as 70%, which may increase the amount of home equity you need to retain while doing the cash-out.

For example, Ian has a primary residence single-family home with a property value of $400,000 and a current mortgage balance of $100,000. His calculations would look like this: $400,000 x 80% - $100,000 ($320,000) - $100,000 = $220,000 The maximum amount Ian can cash out is $220,000.

Jane has an investment property with 3 units, and the property value is $1,200,000. Her current mortgage balance is $300,000. In this case, the maximum LTV limit is 70%, so Jane needs to keep at least 30% home equity after taking cash out. Her calculations would look like this:

$1,200,000 x 70% - $300,000 ($840,000) - $300,000 = $540,000 The maximum amount Jane can cash out is $540,000.

See your refinance rates with Better Mortgage, or use this cash out refinance calculator to see how much you could borrow and what the cost of your new monthly payment would be.

More resources

• The 3 most important numbers for your mortgage application
• Is a cash-out refinance right for you?
• Primary residence, second home, or investment property: What’s the difference?

Disclaimer: This post is for informational purposes only, and is not intended to provide, and should not be relied upon for tax, legal or accounting advice.