Cash-Out Refinance With No Mortgage: How It Works

Yes, you can get a cash-out refinance with no mortgage on the home. Lenders generally treat a new first mortgage on a paid-off home as a cash-out refinance, even though there is no loan to pay off. You receive the loan amount minus any closing costs paid from it.

How a cash-out refinance with no mortgage works

Fannie Mae’s Selling Guide says a cash-out refinance can be “a new mortgage on a property that does not have a mortgage lien against it (the borrower owns the property free and clear at the time of refinance).” Freddie Mac and FHA rules agree, so the loan follows cash-out limits on how much of the home’s value you can borrow.

That cap is the maximum loan-to-value (LTV) ratio: the loan amount divided by the appraised value. For a one-unit primary residence, conventional and FHA cash-out refinances both top out at 80% LTV. VA cash-out loans are not available on a home with no lien.

Say a paid-off home appraises at $400,000. At 80%, the largest loan is $320,000 (80% x $400,000). Closing costs may be paid from the proceeds, so the cash you receive would be lower. Your income, credit and debts also limit the amount, and meeting the cap does not guarantee approval.

For the general pros and cons of taking equity out of a home, see our cash-out refinance guide.

What to weigh before borrowing against a paid-off home

A new loan adds a monthly payment and makes the home its collateral. If you fall behind, you could lose the home to foreclosure, as the Consumer Financial Protection Bureau (CFPB) warns for loans secured by your house.

So look at other ways to raise the money first. The CFPB suggests exploring alternatives that do not put your home at risk of a forced sale. An unsecured personal loan may carry a higher rate than a mortgage, but it does not use the house as collateral.

If you are near or in retirement, think about the term too. The CFPB notes that a new 30-year mortgage taken out close to retirement can become a hardship later, and it suggests weighing a 10- or 15-year term instead.

Compare the APR, not only the rate

The annual percentage rate (APR) includes the interest rate plus certain lender fees, so it gives a fuller picture of cost. Compare APRs on the Loan Estimate for each offer, and compare the cash you will actually receive after costs.

Closing costs can include an appraisal fee, title insurance, government taxes and prepaid items such as property taxes and homeowners insurance, according to the CFPB. A lender credit lowers them, but usually through a higher rate or loan amount. For a breakdown, see how much it costs to refinance.

Freddie Mac’s weekly survey put the average 30-year fixed rate at 7.11% on November 12, 2026, up from 6.24% a year earlier. That survey tracks home purchase loans for borrowers with strong credit and 20% down. Under Fannie Mae’s loan-level price adjustment (LLPA) matrix, a cash-out refinance carries larger price adjustments than a no-cash-out refinance at the same credit score and LTV, so lenders often price cash-out loans higher.

How lenders qualify you

The lender reviews your income, credit history and debt-to-income ratio (DTI), which is your monthly debt payments divided by your gross monthly income.

Fannie Mae removed the 620 minimum for loans run through its Desktop Underwriter (DU) system on November 16, 2025. However, manually underwritten loans still have minimums, and many lenders keep a higher one as an overlay. For a DU cash-out loan with a DTI above 45%, Fannie Mae also requires six months of reserves.

The lender usually orders an appraisal to set the home’s value, although some conventional loans may qualify for Fannie Mae’s appraisal waiver (value acceptance). Expect to document your income, including any retirement or Social Security income you use to qualify, plus bank statements and your homeowners insurance. The title search should also show no liens, so clear any old lien that was never released.

Cash-out refinance with no mortgage: limits by loan program

Each program sets its own cap for a home you own free and clear.

Conventional limits by property type

Conventional caps drop for multi-unit homes, second homes and rentals. Freddie Mac’s Guide Section 4203.1 and Fannie Mae’s Eligibility Matrix list the same cash-out limits:

These caps are for site-built homes. Fannie Mae’s Eligibility Matrix lists a lower 65% cap for a cash-out refinance of a manufactured home.

For a primary residence, Freddie Mac also requires every borrower to live in the home. Loan amounts are subject to the conforming limit, which is $832,750 for a one-unit home in most counties. Read more in our conventional refinance guide.

FHA rules on a paid-off home

HUD Handbook 4000.1 (Section II.A.8.d.v) states that “[p]roperties owned free and clear may be refinanced as cash-out transactions.” The maximum LTV and the maximum combined LTV are both 80% of the Adjusted Value.

At least one borrower must have owned the home and lived in it as a principal residence for the 12 months before the lender gets the FHA case number. An inherited home is the exception: you do not need a waiting period if you have never treated it as an investment property. If you rented it out after inheriting it, you must first live there for 12 months.

FHA also bars income from a non-occupant co-borrower on a cash-out loan. Because an FHA cash-out loan is at 80% LTV or less, the annual mortgage insurance premium lasts 11 years instead of the life of the loan. See our FHA cash-out refinance guidelines for the rest of the program rules.

VA loans need an existing lien

VA Pamphlet 26-7 says refinancing loans “made on properties without an existing mortgage or lien of record are not eligible for guarantee by VA.” So a veteran with a paid-off home would need a conventional or FHA loan, or one of the alternatives below. Our VA cash-out refinance guide covers the rules when you do have a loan.

The six-month ownership rule and its exceptions

For a conventional cash-out loan, at least one borrower must have been on title for six months. Fannie Mae measures to the date the new loan disburses, while Freddie Mac measures to the note date. The main exceptions:

• Inheritance or legal award: No waiting period if you inherited the home or a court awarded it to you, for example in a divorce.
• Delayed financing: If you bought the home with cash in the past six months, you may borrow back what you paid, plus closing costs, within the LTV caps. See how delayed financing works.
• LLC ownership: Time the home was held by an LLC you majority-own or control can count, but title must move into your name by closing.
• Revocable trust: Under Fannie Mae’s rules, time held by an inter vivos revocable trust can count if you are the primary beneficiary.

No equity is not the same as no mortgage

A home with little or no equity is the opposite case. A refinance that takes cash out needs equity, because every program’s cap leaves a cushion. For a one-unit primary residence, that cushion is 20% of the value.

With little or no equity, the options are different. Our guide to high LTV refinance options explains them.

Alternatives to a cash-out refinance on a paid-off home

You can also get cash without a refinance. Each option below is still secured by the home.

Home equity loan

A home equity loan pays a lump sum, usually at a fixed rate, according to the CFPB. It may also have upfront fees, so compare total cost rather than only the payment. See current home equity loan rates and requirements.

Home equity line of credit (HELOC)

A HELOC lets you borrow as needed during a draw period, usually at a variable rate. Then the repayment period begins, and the CFPB notes that payments are often much higher once it starts. Fees vary by plan: the CFPB lists possible application, closing, annual, inactivity and early cancellation fees.

A lender sets a HELOC limit from your income, credit and home value when you apply, and the line can later be frozen or reduced. Under Regulation Z, the lender may freeze or reduce the line if the home’s value drops significantly or a material change in your finances makes repayment doubtful. Read more about the home equity line of credit, or compare a cash-out refinance vs. a HELOC.

Reverse mortgage

A Home Equity Conversion Mortgage (HECM), the most common reverse mortgage, is for homeowners 62 and older. You make no monthly mortgage payments, but interest and fees add to the balance, and you still pay property taxes and homeowners insurance and keep up the home. Counseling from a HUD-approved agency is required, and the home value counted is capped at a national limit that HUD sets each year. Learn more about reverse mortgages for seniors.

Risks and your right to cancel

A new loan puts the home at risk if your income falls, so budget for the payment, taxes and insurance before you close.

Federal law gives you a short window to back out. For a consumer-purpose loan on your principal residence, Regulation Z, 12 CFR 1026.23 lets you rescind until midnight of the third business day after the latest of these:

• Closing (consummation)
• Delivery of the notice of your right to rescind
• Delivery of all material disclosures

The purchase-loan exemption does not apply here, since you are not buying the home. Unless you waive the right for a bona fide personal financial emergency, the lender generally cannot release the money until the rescission period ends. A new HELOC on your principal residence carries the same right under section 1026.15. Second homes and rentals do not.

Frequently asked questions

Can you do a cash-out refinance on a house that is paid off?

Yes. Fannie Mae, Freddie Mac and FHA generally treat a new first mortgage on a paid-off house as a cash-out refinance. VA cash-out loans, however, require an existing lien.

How much can you borrow on a paid-off house?

For a one-unit primary residence, conventional and FHA loans cap the loan at 80% of the appraised value. On a $400,000 home, that is up to $320,000 before closing costs. Your income, credit and debts may lower the amount.

Is a HELOC or a cash-out refinance better for a paid-off home?

A cash-out refinance pays one lump sum, which suits a single large expense. A HELOC lets you draw as needed, usually at a variable rate, so compare the full cost of each offer.

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

Conventional loans require at least one borrower on title for six months, unless an exception applies, such as inheritance or delayed financing. FHA requires 12 months of ownership and occupancy as your principal residence before case number assignment, with an inheritance exception.

What is a no-cash-out refinance, and can I get one on a home with no mortgage?

A no-cash-out refinance, often called a rate-and-term refinance, mainly pays off an existing mortgage and the costs of the new loan, with little or no cash back. With no mortgage, there is nothing to pay off, so a new first mortgage on a home you own free and clear is generally treated as a cash-out refinance. Freddie Mac and Fannie Mae make narrow exceptions for certain renovation and construction loans.

Can I refinance with no equity?

You cannot take cash out with little or no equity, because each program caps the loan below the home’s value. Some programs may still let you refinance an existing loan to change the rate or term. See our guide to refinancing with little equity.

Is a cash-out refinance with no mortgage right for you?

A cash-out refinance with no mortgage can turn a paid-off home into a lump sum of up to 80% of its value (one-unit primary residence). In exchange, you take on a new payment secured by the home. If you need money over time, a HELOC or home equity loan may cost less to set up.

As a next step, request Loan Estimates from two or three lenders on the same day. Then compare the APR and the cash you would receive after closing costs.