How Much Equity Do You Need to Refinance?

Refinancing your mortgage can be a smart move—whether you want to lower your monthly payments, shorten your loan term, or tap into your home’s value. But one of the first questions we get at Rapid Home Loan is:

“How much equity do I need to refinance?”

Let’s break it down.

🏠 What Is Home Equity?

Home equity is the difference between what your home is worth and how much you still owe on your mortgage. For example:

If your home is worth $400,000 and your mortgage balance is $280,000, you have $120,000 in equity (or 30%).

Lenders use your loan-to-value ratio (LTV) to assess how much equity you have:

LTV = Loan Amount ÷ Home Value

The lower your LTV, the more equity you have—and the better your chances of qualifying for a refinance.

🔍 So, How Much Equity Do You Need?

✅ For a Traditional Rate-and-Term Refinance:

Most lenders require at least 20% equity (meaning an LTV of 80% or less)
Some may allow as little as 5–10% equity depending on your credit, income, and loan type

✅ For a Cash-Out Refinance:

You’ll usually need to retain at least 20% equity in your home after the refinance
That means your LTV must be 80% or lower after you take cash out
Example: If your home is worth $400,000, your new loan should be no more than $320,000

✅ For an FHA Refinance:

FHA Streamline: No appraisal or equity required
FHA Cash-Out: Requires at least 20% equity (LTV of 80%)

✅ For a VA Refinance (IRRRL or Cash-Out):

Streamline (IRRRL): No minimum equity required
Cash-Out: Usually capped at 90% LTV, meaning you need at least 10% equity

🏦 Why Equity Matters to Lenders

Lenders look at equity as a form of security. The more equity you have:

The less risk you pose to the lender
The better interest rate you’re likely to get
The more options you’ll have for refinance programs

If you have less than 20% equity, you might still be able to refinance, but you could face:

Higher interest rates
Mortgage insurance (PMI)
Stricter credit and income requirements

💡 Not Enough Equity? Here’s What You Can Do:

If you don’t have enough equity to refinance right now, don’t worry. You still have options:

Pay down your mortgage faster to build equity
Wait for your home’s value to increase with the market
Look into government programs that don’t require equity
Talk to Rapid Home Loan about creative solutions, including streamline refinance options

✅ Is Refinancing Right for You?

At Rapid Home Loan, we don’t just look at numbers—we look at your full financial picture to determine if refinancing is a smart move for your goals.

Whether you want to:

Lower your monthly payment
Get cash out for renovations or debt consolidation
Pay off your mortgage faster
Lock in a better interest rate

We’ll guide you every step of the way, starting with a free refinance assessment.