Cash-Out Refinance: 2027 Guide for Hampton Roads Homeowners

A cash-out refinance replaces your mortgage with a larger one and pays you the difference in cash at closing. Heading into 2027, conventional and FHA loans let you borrow up to 80% of your home's appraised value on a primary residence, and a VA cash-out can go to 100%. The deciding factor is the rate: Freddie Mac put the average 30-year fixed at 7.24% as of October 29, 2026. If your current rate is well below that, a cash-out reprices your whole balance, and a HELOC or home equity loan may cost less.

Feature	Cash-Out Refinance	HELOC	Home Equity Loan
Structure	Replaces 1st mortgage	Separate 2nd lien, revolving	Separate 2nd lien, lump sum
Rate type	Fixed or adjustable	Usually adjustable	Usually fixed
Your current rate	Replaced on the whole balance	Kept on 1st mortgage	Kept on 1st mortgage
Best for	Large lump sum when new rate is near or below your current rate	Staggered draws (projects in phases)	One-time need with a fixed payment
Closing costs	Full refinance costs on the new loan	Often lower; varies by lender	Often lower; varies by lender
Term	Commonly 15 or 30 years	Draw period (usually 10 years), then repayment	Fixed term set by lender

Compare rate, term and closing costs across all three on official Loan Estimates before choosing.

How a cash-out refinance works

The new loan pays off your old one, and you receive the difference at closing, with a new rate and term on the full amount. Example: your home appraises at $400,000 and you owe $200,000. At the 80% conventional cap the new loan can be $320,000, so you receive up to $120,000 less closing costs.

On a primary residence, federal law generally gives you three business days after closing to cancel, and the lender can't release the cash until that window passes (12 CFR 1026.23). To estimate your equity first, start with a free home value estimate.

The 2027 rate math: compare the blended cost

Freddie Mac's 30-year average was 7.24% on October 29, 2026, up from 6.17% a year earlier. Because a cash-out moves your entire balance to the new rate, compare total monthly cost.

Illustration (hypothetical rates, principal and interest only): you owe $200,000 at 3.5% with 25 years left (about $1,001 a month) and need $60,000.

• Cash-out to $260,000 at 7.25% for 30 years: about $1,774 a month.
• Keep the first mortgage and add a $60,000 home equity loan at an assumed 8.5% for 20 years: about $1,522 a month combined.

Here the second lien saves about $250 a month. The math flips when your current rate is near or above today's.

Cash-out refinance requirements

• Equity: Fannie Mae caps cash-out at 80% LTV for a one-unit primary residence, 75% for two to four units or a second home, and 75% (one unit) or 70% (two to four units) for an investment property. FHA caps at 80%, owner-occupied only.
• Seasoning, conventional: one borrower on title for six months, and any first mortgage being paid off at least 12 months old, note date to note date.
• Seasoning, FHA: owned and lived in as your principal residence for the 12 months before case number assignment, with every mortgage payment made within the month due for the last 12 months.
• Credit: Fannie Mae removed its 620 minimum for Desktop Underwriter loans in November 2025; manually underwritten cash-outs need 640 to 700. FHA's floor is 500. VA requires you to meet VA's and your lender's credit standards. Most lenders set minimums above program floors.
• Income and appraisal: full documentation, a debt-to-income review, and an appraisal. Fannie Mae requires six months of reserves when DTI exceeds 45%.

Loans above the conforming limit follow jumbo rules. The 2026 one-unit limit is $832,750 in every Hampton Roads city and county (FHFA, announced November 25, 2025); the 2027 limit is expected in late November.

VA cash-out refinance rules

With a VA Certificate of Eligibility, you can refinance a VA or non-VA loan up to 100% of the appraised value, the highest cap of any major program (38 CFR 36.4306). Lenders may set a lower cap.

• Funding fee: 2.15% first use, 3.3% after (since April 7, 2023). It can be financed, but any part above 100% of value is paid in cash at closing. Veterans receiving VA disability compensation, surviving spouses receiving DIC and active-duty Purple Heart recipients are exempt.
• Occupancy: you must live in the home. If you've moved out on PCS orders, a cash-out generally isn't available; a VA IRRRL accepts prior occupancy but is a rate-reduction loan, not an equity loan.
• Seasoning: when refinancing a VA loan, the later of 210 days after the first payment due date and six monthly payments.
• Net tangible benefit: the loan must pass one of VA's tests, such as removing mortgage insurance or ending at 90% LTV or less, and the lender must show you the equity you're removing, at application and at closing.

VA loans carry no monthly mortgage insurance, which can make a VA cash-out a way out of FHA monthly MIP. See our VA loan guide and VA refinance options in Hampton Roads.

Cash-out vs. HELOC vs. home equity loan

A cash-out gives you one new first mortgage. A HELOC is a second lien you draw from, usually for about 10 years, at a rate that is generally adjustable. A home equity loan is a second lien paid as a lump sum, usually at a fixed rate. For rate-and-term and streamline options, see the seven main types of refinance loans.

When cash-out makes sense

• Your current rate is near or above today's rates
• Major improvements (roof, HVAC, kitchen), where interest may be deductible
• Consolidating high-rate debt you will pay down on a set schedule

When cash-out is a bad idea

• Your current rate is well below today's and a second lien would cover the need
• Rolling credit card debt into 30 years with no payoff plan
• Funding vacations, vehicles or other spending that doesn't build value
• You expect to sell or PCS before closing costs and fees are recovered

Frequently Asked Questions

How much cash can I take out?

On a one-unit primary residence, up to 80% LTV conventional or FHA and 100% VA, minus your payoff and costs. USDA does not allow cash-out.

What credit score do I need for a cash-out refinance?

Program floors are low (FHA 500; no fixed minimum for Fannie Mae Desktop Underwriter loans), but lenders set their own minimums and price by score.

How long does a cash-out refinance take?

It depends on the lender and appraisal, so ask for current turn times. On a primary residence, add the three-business-day rescission period before funds are released.

Can I deduct interest on a cash-out refinance?

Per IRS Publication 936 (2025), only interest on cash used to buy, build or substantially improve the home, within the $750,000 debt limit ($375,000 married filing separately) for loans after December 15, 2017. You must itemize; ask a tax professional.

Can I do a cash-out refinance on a VA loan?

Yes, up to 100% of value, if you live in the home and meet VA's seasoning and net tangible benefit rules.

What are the closing costs on a cash-out refinance?

Lender, appraisal, title and recording fees plus prepaid items, a pricing adjustment on conventional cash-outs and the VA funding fee on VA loans. Your Loan Estimate lists each one. See how closing costs work in Virginia.

Can I cash-out refinance a rental property?

Yes, with a conventional loan: 75% LTV for one unit and 70% for two to four units. FHA and VA cash-outs require owner occupancy.

Sources & further reading

• Freddie Mac, Primary Mortgage Market Survey (Oct. 29, 2026)
• Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
• Fannie Mae Eligibility Matrix (Aug. 5, 2026)
• HUD Mortgagee Letter 2019-11, FHA cash-out LTV
• HUD Handbook 4000.1, FHA Single Family Housing Policy
• 38 CFR 36.4306, VA refinancing loans
• VA, Cash-Out Refinance Loan
• VA, Funding Fee and Closing Costs
• FHFA, Conforming Loan Limits
• IRS Publication 936, Home Mortgage Interest Deduction
• CFPB, Regulation Z right of rescission
• CFPB, Home equity loan vs. HELOC
• CFPB, Loan Estimate

Program rules and rates reflect sources checked October 29, 2026. Rates change weekly and lenders may apply stricter standards; confirm current details with your lender or a licensed professional before relying on any figure.