The equity requirement depends on what type of cash-out refinance you’re borrowing. Conventional and FHA lenders allow you to borrow up to a maximum 80% loan-to-value (LTV) ratio. VA lenders allow up to a 90% LTV for cash-out refinances. Your LTV ratio is the percentage of your home’s value that is financed by the loan.
For example, if your house is worth $200,000 and you owe $100,000 on your existing mortgage, you have $100,000 in available equity. Keeping the maximum 80% LTV ratio requirement in mind, you may borrow up to an additional $60,000 with a cash-out refinance. To calculate this, multiply your home’s value by 80% ($200,000 x 0.80 = $160,000) and subtract your outstanding loan balance from that amount ($160,000 – $100,000 = $60,000).