Cash-Out Refinance in California: Limits, Costs and Alternatives

I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. I’m known as a creative mortgage broker: when a bank says no, I find the lender and the loan structure that can say yes. Call (800) 239-1103.

A cash-out refinance replaces your current mortgage with a larger one and pays you the difference in cash. On a conventional loan you can usually borrow up to 80% of your primary home’s value (less for second homes, investment properties, and 2–4 units). With 30-year rates near 7% in late 2026, a cash-out refinance makes the most sense when your current rate is already near today’s rates or you need to restructure the whole loan; if you have a low-rate first mortgage, a HELOC or home equity loan usually costs less.

How a Cash-Out Refinance Works

You take out a new first mortgage for more than you owe. The new loan pays off the old one, covers closing costs, and the rest comes to you at closing.

Example (primary residence, conventional)
Appraised value	$1,200,000
Maximum new loan at 80% LTV	$960,000
Current mortgage balance	$650,000
Maximum cash before closing costs	$310,000

You don’t have to borrow the maximum. Borrowing less (for example, 70% or 75% LTV) usually improves your pricing.

Cash-Out Limits by Loan Type

Loan type	Typical maximum cash-out LTV	Key rules
Conventional — primary residence, 1 unit	80%	At least one borrower on title 6 months; the first mortgage being paid off must be at least 12 months old
Conventional — 2–4 units, second home, investment	Generally 70%–75%	Larger price adjustments for non-owner-occupied property
FHA cash-out	80%	Owner-occupied primary residence for the prior 12 months with on-time payments; mortgage insurance applies
VA cash-out	Up to 100% under VA rules; many lenders cap lower	For eligible veterans; VA funding fee applies unless exempt
Jumbo cash-out	Varies by lender, often lower LTVs and caps on cash	Above the county conforming limit
Non-QM (bank statement, DSCR)	Varies	For self-employed borrowers and investors; see DSCR loans

For 2026, conforming cash-out loans go up to $832,750 in most counties and up to $1,249,125 in high-cost counties such as Marin, San Francisco, Alameda, Contra Costa, Los Angeles, and Orange. Napa’s limit is $1,017,750 and Sonoma’s is $897,000. See 2026 conforming loan limits.

Cash-Out Refinance vs. HELOC vs. Home Equity Loan

	Cash-out refinance	HELOC	Home equity loan
What happens to your first mortgage	Replaced	Kept	Kept
Rate	Usually fixed	Usually variable (tied to prime)	Fixed
How you get funds	Lump sum	Draw as needed	Lump sum
Closing costs	Full refinance costs	Usually lower	Moderate
Best when	Your current rate is near today’s rates, or you’re restructuring the whole loan	You have a low first-mortgage rate and need flexible or staged funds	You have a low first-mortgage rate and want a fixed payment

I offer HELOCs up to 95% combined LTV for qualified borrowers and home equity loans up to $1 million, so we can compare all three side by side. See HELOCs, 95% CLTV HELOCs, and HELOC vs. cash-out refinance.

Why the math changed in 2026

Say you bought in 2021 with a $750,000 loan at 3.25%. Your payment is about $3,264, and you now owe roughly $670,000. You need $150,000.

• Cash-out refinance to about $820,000 at 7.00%: roughly $5,455 a month — and your 3.25% rate is gone.
• Keep the first and add a $150,000 HELOC at an illustrative 8.5% interest-only: about $3,264 + $1,063 = $4,327 a month.
• Keep the first and add a 20-year fixed home equity loan at an illustrative 8.25%: about $3,264 + $1,278 = $4,542 a month.

Illustrative rates, principal and interest only. HELOC rates float, and interest-only payments don’t reduce the balance.

For many California homeowners with pandemic-era rates, a second lien wins. The cash-out refinance wins when your current rate is already near 7%, when you need to pay off a HELOC or other debt that’s pushing up your payments, or when you want to remove someone from title and the loan at the same time (for example, in a divorce buyout).

Good Uses — and Uses to Think Twice About

• Renovations and ADUs: improvements that add value or rental income. See ADU financing and renovation loans.
• Paying off high-interest debt: moving 20%+ credit card balances to a mortgage rate can cut payments sharply — but it turns unsecured debt into debt secured by your house, and stretching it over 30 years can cost more in total. Only do it with a plan not to rebuild the balances.
• Buying another property: equity from your home can fund a down payment on a rental or second home.
• Business or tuition funding: sometimes cheaper than alternatives, but your home is the collateral.
• Think twice about using home equity for everyday spending or anything without a clear financial return.

Requirements Checklist

• Credit: conventional lenders commonly look for 620+; better scores get meaningfully better pricing, and cash-out loans carry extra loan-level price adjustments.
• Debt-to-income: often up to about 45%–50% with automated underwriting, depending on the full file. See DTI in California.
• Seasoning: for conventional loans, at least one borrower on title for 6 months and the existing first mortgage at least 12 months old (exceptions include inherited property and certain trust or LLC ownership). If you bought with cash recently, ask about delayed financing.
• Property: if the home was listed for sale, it must be off the market before the new loan funds.
• Appraisal: the appraised value sets your maximum loan. See if the appraisal comes in low.

California-Specific Things to Know

• Anti-deficiency protection: California’s purchase-money protection (Code of Civil Procedure §580b) can carry over when you refinance an owner-occupied purchase loan, but generally only for the amount used to pay off the original purchase loan and costs — not the new cash you take out. Ask a real estate attorney how it applies to you.
• Right of rescission: on a refinance of your primary residence, federal law generally gives you three business days after signing to cancel before the loan funds.
• Taxes: mortgage interest is generally deductible only on debt used to buy, build, or substantially improve the home (within IRS limits). Interest on cash-out used for other purposes, like paying off credit cards, usually isn’t deductible. Check with your CPA.
• Property tax: a refinance doesn’t trigger a Prop 13 reassessment. See the Prop 13 guide.

Frequently Asked Questions

How much equity can I take out with a cash-out refinance?

On a conventional loan for a one-unit primary residence, usually up to 80% of the appraised value minus what you owe. Second homes, investment properties, and 2–4 unit homes are generally limited to about 70%–75%. FHA allows 80%, and VA allows up to 100% under its rules, though many lenders cap VA cash-out lower.

Is a cash-out refinance or a HELOC better right now?

If your current mortgage rate is well below today’s roughly 7% rates, a HELOC or home equity loan usually costs less because you keep your low first mortgage. A cash-out refinance makes more sense when your rate is already near market, or when you need to restructure or consolidate the whole loan.

How long do I have to own my home before a cash-out refinance?

For a conventional cash-out, at least one borrower must have been on title for six months, and the first mortgage being paid off must be at least 12 months old. FHA generally requires 12 months of owner-occupancy. Delayed-financing rules can help if you recently bought with cash.

What credit score do I need?

Conventional lenders commonly require 620 or higher, and pricing improves significantly at higher scores. FHA and some non-QM programs can work with lower scores, depending on the lender.

Is the interest on a cash-out refinance tax-deductible?

Generally only on the portion of debt used to buy, build, or substantially improve the home, within IRS limits. Interest on cash used to pay off credit cards or for other purposes usually isn’t deductible. Confirm with your CPA.

Does a cash-out refinance affect my property taxes?

No. Refinancing isn’t a change in ownership, so it doesn’t trigger a Prop 13 reassessment. Changing who is on title can, so check before adding or removing owners.

Related Resources

• Refinancing in California
• HELOC vs. Cash-Out Refinance
• HELOCs in California
• 95% CLTV HELOCs
• Current Mortgage Rates
• California Closing Costs

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