Yes, you can get a mortgage on a house you already own, whether you still owe on it or hold it free and clear. Four routes are available: a cash-out refinance, a home equity loan, a home equity line of credit, and, if you recently paid cash for the property, delayed financing. Each puts a new lien on the home in exchange for funds you can use as you choose, and each has its own structure, cost, and equity requirement.
The Four Ways to Borrow Against a Home You Own
Cash-Out Refinance
A cash-out refinance replaces your existing mortgage with a new, larger loan. The new loan pays off whatever balance remains, and you take the difference in cash. You end up with one monthly payment at whatever rate the new loan carries.
On a primary residence, most conventional lenders cap the new loan at 80% of the home’s appraised value.1Fannie Mae. Eligibility Matrix So if the home appraises at $400,000 and you owe $150,000, the new loan could go as high as $320,000, leaving you with roughly $170,000 in cash before closing costs.
The catch is that the refinance dissolves your existing rate. If you locked in something low years ago, replacing it just to pull equity may cost more than it’s worth.
Home Equity Loan
A home equity loan sits behind your first mortgage as a second lien. You get a lump sum at a fixed rate and repay it on a set schedule, usually five to thirty years. Your first mortgage is untouched, which is the point: you keep the old rate on the big balance and only pay today’s rate on the new money.
That new-money rate does run higher than a first-mortgage rate, because the lender’s claim on the property comes second if you default. In early 2026, average home equity loan rates sit around 7%, compared to roughly 6.5% to 7% for first mortgages. How much you can borrow depends on your combined loan-to-value ratio, which counts both your first mortgage balance and the new loan against the appraised value.
Home Equity Line of Credit
A HELOC works like a credit card secured by the house. You get a revolving line, draw from it as needed, and pay interest only on what you use. That makes it a common fit for staged expenses like a renovation done in phases.
Most HELOCs run in two phases. During the draw period, typically ten years, you can borrow and make interest-only payments. Then the repayment period begins, usually up to twenty years, and you start paying principal and interest. The payment can jump sharply at that transition. HELOC rates are almost always variable, so your cost of borrowing moves with the market.
Delayed Financing After a Cash Purchase
If you bought the home outright with cash, you don’t have to wait to put a mortgage on it. Under Fannie Mae’s guidelines, borrowers who purchased within the past six months are eligible for a cash-out refinance, provided they document that the original purchase funds came from their own assets rather than an undisclosed loan.2Fannie Mae. Cash-Out Refinance Transactions This is a common move for investors and for buyers who used cash to win a bidding war and then wanted their capital back.
How Much You Can Borrow
Loan-to-value is the number that drives everything. For a cash-out refinance on a primary residence, most conventional lenders limit the new loan to 80% of the appraised value, meaning you need at least 20% equity remaining after funding.1Fannie Mae. Eligibility Matrix
Going above 80% LTV on a conventional loan generally triggers private mortgage insurance, which adds to your monthly payment and stays in place until your equity climbs back above the threshold.3Fannie Mae. Mortgage Insurance Coverage Requirements For most people, the 80% ceiling is the practical limit on how much they can pull out.
What You Need to Qualify
Credit Score
620 is the typical floor for conventional loan programs, though scores in the mid-to-upper 700s earn meaningfully better rates.4Experian. What Is a Conventional Loan – Section: How a Conventional Loan Works The gap between a 660 and a 760 score can translate to tens of thousands of dollars over a thirty-year loan, so it pays to check your credit before applying and dispute any errors.
Debt-to-Income Ratio
Lenders compare your total monthly debt payments to your gross monthly income. The old 43% cap for qualified mortgages was replaced by a price-based system, but most lenders still use 43% to 50% as a practical guideline.5Consumer Financial Protection Bureau. Qualified Mortgage Definition under the Truth in Lending Act Regulation Z General QM Loan Definition Your new payment counts toward that ratio, so run the numbers before applying.
Appraisal
The lender orders a professional appraisal to confirm the home’s value supports the loan. An appraiser inspects the property and compares it to similar recent sales nearby.6Federal Deposit Insurance Corporation. Understanding Appraisals and Why They Matter If the number comes in low, the lender will shrink the loan or ask you to cover the gap. Appraisals typically run $400 to $800 for a standard single-family home, more for complex or high-value properties.
Investment Properties and Second Homes
You can borrow against a property you own but don’t live in, but the terms tighten. Lenders treat non-primary residences as higher risk because owners under financial pressure tend to protect their own home first.
A cash-out refinance on a single-unit rental tops out at 75% of appraised value, and two-to-four-unit rentals drop to 70%.1Fannie Mae. Eligibility Matrix Second homes cap at 75%. Credit score minimums are higher, and rates typically carry a premium of 0.25% to 0.75% above what a primary residence would command.
One more thing to know: the federal three-day right of rescission does not apply to investment properties or second homes. That cancellation window only protects loans secured by your principal dwelling.7Consumer Financial Protection Bureau. Comment for 1026.23 – Right of Rescission Once you sign on a rental, the deal is final.
Cost and Timeline
Budget 2% to 6% of the new loan amount for closing costs on a refinance. On a $200,000 loan, that’s $4,000 to $12,000, covering the appraisal, title work, lender origination fee, recording charges, and document preparation. Some lenders offer “no-closing-cost” options that fold the fees into the loan balance or nudge the rate up slightly. If you plan to stay in the home for several years, paying upfront usually comes out cheaper.
The lender also orders a new title search and requires a lender’s title insurance policy. Your original policy covered the loan that’s being replaced, not the new one.
From application to closing, a refinance averages about 42 days. Streamlined products can close faster; complicated files can stretch past 60 days.
The Three-Day Cancellation Window
When the loan is secured by your primary residence, federal law gives you three business days after closing to cancel for any reason. The window runs until midnight of the third business day after the last of three events: signing the loan documents, receiving the Truth in Lending disclosures, and receiving your rescission notice.8Consumer Financial Protection Bureau. 12 CFR Part 1026 Regulation Z – 1026.23 Right of Rescission Saturdays count as business days for this purpose; Sundays and federal holidays do not.9Consumer Financial Protection Bureau. How Long Do I Have to Rescind When Does the Right of Rescission Start
The lender cannot release funds until the rescission period closes. After that, money typically arrives within a day or two by wire.
Taxes on the Money and the Interest
The cash you receive from a refinance, home equity loan, or HELOC is not taxable income. It’s a loan. The tax question is whether you can deduct the interest.
For 2026, the rules are shifting. The Tax Cuts and Jobs Act provisions that capped the mortgage interest deduction at $750,000 of total debt and eliminated the separate home equity interest deduction are set to expire at the end of 2025. Starting in 2026, the deductible debt limit reverts to $1 million ($500,000 if married filing separately), and interest on home equity debt of up to $100,000 becomes deductible again regardless of how you use the proceeds.10Internal Revenue Service. Publication 936, Home Mortgage Interest Deduction
That’s a real change. Under the rules that ran from 2018 through 2025, a home equity loan used to pay off credit cards or fund a business produced no deductible interest. Starting in 2026, that interest becomes deductible up to the $100,000 equity debt limit, as long as your total mortgage debt stays within the overall cap. Congress could still modify these provisions before they take effect, so check the current rules when you file. The deduction only helps if you itemize.