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Yes. You can get a cash-out refinance on a home you own free and clear. Lenders treat a new mortgage on a paid-off home as a cash-out refinance even though there is no existing loan to pay off. You receive the loan amount minus any closing costs paid from it.
How much you can borrow depends on the loan program, your home’s appraised value and your finances. Conventional and FHA cash-out refinances on a one-unit primary residence are generally capped at 80% of the home’s value. That means a paid-off home worth $400,000 could support a loan of up to $320,000. Meeting a program’s limit does not guarantee approval; credit, income, property and other underwriting requirements apply.
Check your eligibility for a cash-out loan. Start here (Nov 4th, 2026)
What to weigh before borrowing against a paid-off home
A cash-out refinance turns equity you own outright into mortgage debt secured by your home. If you fall behind on payments, you could lose the home to foreclosure. It tends to make the most sense when you have a clear use for the money, reliable income to cover the new payment and no cheaper way to borrow.
Any loan that isn’t considered a purchase is called a refinance — despite the fact that there isn’t a loan to pay off.
Lana Jern, Owner of Uptown Mortgage
“Anytime you are taking money against your property, you are taking a debt that you didn’t have before,” Jern says. “How you will repay that loan is something to consider.”
She recommends looking at other ways to raise a lump sum before borrowing against your primary residence. An unsecured personal loan may carry a higher interest rate than a mortgage, but it does not require you to pledge your home as collateral. Missed payments can still damage your credit and lead to collection action.
For example, you may need to pay for your daughter’s college tuition, and she needs a car, too. There might be several ways to find the funds instead of getting a new mortgage. Maybe your daughter can apply for a student loan through her college or the government. You could also acquire a low-interest car loan for the car she needs.
Before you choose a cash-out refinance or a home equity loan, compare the annual percentage rate (APR) on each option. That’s because the APR includes interest and certain fees. A lower rate may not be worth putting your primary residence on the line for non-essential expenses.
How to access home equity if you’ve paid off your mortgage
The process of borrowing against your home equity will be similar to the application process for your original mortgage when you purchased the home.
A lender will consider your income, credit score and debt-to-income ratio. It will also usually order an appraisal to set your home’s value. Credit score requirements vary by lender and loan program.
Cash-out refinance and home equity options for a paid-off home
When you’re getting a cash-out refinance, you have a number of different mortgage options to choose from. Different types of mortgages carry different loan terms, and different loan limits and some require monthly mortgage insurance.
Cash-out refinance requirements: conventional vs. FHA vs. VA
Options for a cash-out refinance on a home with no mortgage include conventional loans that follow Fannie Mae or Freddie Mac rules and FHA-insured loans. Fannie Mae and FHA guidelines both allow a cash-out refinance on a property owned free and clear. VA cash-out refinances work differently, as the table below shows.
With no mortgage balance to pay off, the amount you can borrow depends on your home’s appraised value and the program’s maximum loan-to-value (LTV) ratio. Your loan is subject to loan limits and what your income qualifies you for.
Conventional cash-out refinances on a one-unit primary residence are generally capped at 80% LTV. The 20% you can’t borrow stays in the home as equity, much like a down payment. Freddie Mac’s limits are lower for two- to four-unit primary homes, second homes and investment properties, at 75% or 70% depending on the property.
FHA cash-out refinances generally have an 80% LTV limit. At least one borrower generally must have owned and occupied the home as a principal residence for the 12 months before FHA case-number assignment. An inheritance exception may apply if the home has not been used as an investment property since inheritance. FHA loans carry an upfront mortgage insurance premium of 1.75% of the base loan amount plus an annual premium. At 90% LTV or below, which covers every FHA cash-out refinance, the annual premium lasts 11 years rather than the life of the loan. Mortgage insurance adds to the total cost, so compare the APR on FHA and conventional offers.
Conventional, FHA and VA rules side by side
| Loan type | Maximum LTV (one-unit primary home) | Ownership or occupancy rule | Mortgage insurance or fee |
|---|---|---|---|
| Conventional (Fannie Mae or Freddie Mac) | 80% | Generally, at least one borrower must have held title for six months; measured to disbursement for Fannie Mae and to the note date for Freddie Mac. Exceptions vary by agency; Fannie Mae permits qualifying inheritance and delayed-financing exceptions. | No mortgage insurance at 80% LTV or below |
| FHA | 80% | Generally, at least one borrower must have owned and occupied the home as a principal residence for 12 months before FHA case-number assignment. An inheritance exception may apply if the property has not been used as an investment property since inheritance. | Upfront premium of 1.75% of the base loan amount, plus an annual premium for 11 years at 90% LTV or below |
| VA | Up to 100% of the home’s reasonable value | Must refinance an existing mortgage or other recorded lien; a lien-free home is ineligible. | No monthly mortgage insurance; a VA funding fee generally applies unless the borrower is exempt. |
Credit score requirements vary by lender and program, and meeting a minimum does not guarantee approval. If you bought the home with cash within the past six months, Fannie Mae’s delayed financing exception may let you borrow back what you paid. See how delayed financing works.
Using cash-out proceeds to invest
Some borrowers use cash-out proceeds to invest, which only pays off if the investment earns more than the loan costs.
“Let’s say you take out $100,000 cash from a refinance and invest it into creating more assets. If you put back more than what it cost you, then great,” she says.
For example, it could be worthwhile to use that cash for valuable home renovations or to make a down payment on an investment property.
For more information on the pros and cons of each, check out these articles:
Check your eligibility for a cash-out loan. Start here (Nov 4th, 2026)
Alternatives: home equity loans, HELOCs and reverse mortgages
A cash-out refinance isn’t the only way to turn your home equity into cash. On a paid-off home, a home equity loan, a home equity line of credit (HELOC) or a reverse mortgage can also work. A home equity loan pays a lump sum, while a HELOC lets you borrow as needed, usually at a variable rate. See how a cash-out refinance compares with a HELOC.
If you need house repairs, Jern says, a home equity loan may work out better in the long run.
Jern recommends opening a HELOC before an emergency happens. Some HELOCs require an initial draw. Otherwise, you may leave the line unused, subject to its terms and fees. Access is not guaranteed. The lender may freeze or reduce the line in permitted circumstances. These include a significant decline in home value or a material financial change that creates a reasonable concern about repayment.
Lenders approve a HELOC based on your current income and credit. So if an illness or job loss cuts your income before the line is open, you may no longer qualify.
Jern sees a HELOC as an inexpensive way to set up some security for the future, since a cash-out refinance comes with closing costs.
HELOC costs vary by lender, according to the Consumer Financial Protection Bureau. Some lenders waive setup costs, while others charge application, appraisal or closing fees. Some charge annual, inactivity or early cancellation fees, too.
Reverse mortgages for homeowners 62 and older
An FHA-insured Home Equity Conversion Mortgage (HECM), the most common reverse mortgage, is available to eligible homeowners age 62 or older. It requires no monthly principal-and-interest payment. Borrowing capacity depends on the age of the youngest borrower or eligible non-borrowing spouse, the applicable interest rate and the home value. Borrowing capacity is subject to the 2026 maximum claim amount of $1,249,125. That maximum claim amount is not the cash you can receive. You must meet principal-residence requirements, pay property taxes and homeowners insurance, and maintain the home. The loan generally becomes due when the last borrower dies or no longer occupies the home as a principal residence. This is subject to applicable spouse protections. Failure to meet loan obligations can also lead to foreclosure. Required HECM counseling must be completed before the lender processes the application or obtains an FHA case number.
Jern says some older homeowners use a reverse mortgage to pay for things like travel or upkeep on their home. Reverse mortgages carry fees and interest that add to the balance over time, so compare the cost with other options.
Check your eligibility for a HELOC here (Nov 4th, 2026)
For more information about these other mortgage options, check out the full articles below:
Cash-out refinance with no mortgage: FAQ
Can you do a cash-out refinance on a house that is paid off?
Yes. Fannie Mae and FHA guidelines allow a cash-out refinance on a home owned free and clear. With no existing loan to pay off, you receive the loan amount minus any closing costs paid from it. VA cash-out refinances, however, must refinance an existing mortgage or lien.
How much can you borrow on a paid-off house?
Conventional and FHA cash-out refinances on a one-unit primary residence are generally capped at 80% of the appraised value. On a $400,000 home, that is a loan of up to $320,000 before closing costs. Your income, credit and debts also affect how much you can borrow.
Is a HELOC or a cash-out refinance better for a paid-off home?
A cash-out refinance pays one lump sum and suits a single large expense. A HELOC lets you borrow as needed during a set draw period, usually at a variable rate. Closing costs and ongoing fees differ, so compare the full cost of each offer.
How long do you have to own a home before a cash-out refinance?
Fannie Mae requires at least one borrower to be on title for six months. Exceptions include inheritance and delayed financing for homes bought with cash. At least one borrower generally must have owned and occupied the home as a principal residence for the 12 months before FHA case-number assignment. An inheritance exception may apply if the home has not been used as an investment property since inheritance.
Risks and protections before you close
When you get a new mortgage loan you’re taking on more risk. You put all the work into paying off the loan balance on your first mortgage. Consider whether you want to re-introduce monthly payments into your budget. And, you’re going through the underwriting process with all the verifications and paperwork required that you did when you bought your home.
For consumer-purpose borrowing, a cash-out refinance or newly opened HELOC secured by your principal residence generally carries a federal right to cancel. The deadline is midnight of the third business day after closing or account opening, receipt of the rescission notice, or receipt of all required material disclosures, whichever occurs last.
“The government wants people to have time to go home and determine if they can really afford it,” Jern says.
For example, a cash-out refinance might make sense if you’re planning to make home improvements. You might use the money to pay off high-interest debt. This could be a good strategy if you want to do some debt consolidation and pay off credit cards. It works as long as you don’t accrue more credit card debt again going forward.
Summary: A cash-out refinance on a home with no mortgage turns equity into cash. However, it adds a monthly payment and makes your home the collateral. Compare it with a home equity loan, a HELOC and unsecured options before you apply.
See what cash-out refinance options you're eligible for here (Nov 4th, 2026)
