How Much Equity Do I Need to Refinance My Home?
- 14 Days To Close
- May 27
- 3 min read
Refinancing your mortgage isn’t just about snagging a lower rate; it’s a game of home equity chess. Equity, the difference between your home’s value and what you owe, is your leverage. But how much do you actually need to make a move? While 20% equity is the classic benchmark (letting you dodge mortgage insurance), the truth is messier and more hopeful. Let’s decode the rules, exceptions, and clever workarounds to turn your home’s value into a refinancing win.

Loan-to-Value Ratios = The Refinancing Gatekeeper
Lenders speak in code: “loan-to-value ratio” (LTV).
This percentage, your loan amount divided by your home’s value, determines your refinancing fate. For a traditional rate-and-term refi, most lenders want an LTV of 80% or lower (translation: 20% equity). But if you’re eyeing a cash-out refinance, where you tap equity for renovations or debt consolidation, the bar rises. Expect LTVs capped at 80%, meaning 20% equity remains untouched.
Stuck below 20%? Programs like the FHA Streamline Refinance (for existing FHA borrowers) or the VA Interest Rate Reduction Refinance Loan (IRRRL) let you refinance with negative equity in some cases, as long as you’ve made on-time payments.
Give us a call at (813) 343-4775 to see if you qualify!
How to Refinance with Low Equity
What if your equity is stuck in single digits? Conventional lenders might ghost you, but government-backed loans can be lifelines. FHA loans allow refinancing with as little as 3.5% equity (96.5% LTV), though you’ll pay upfront and annual mortgage insurance premiums (MIP).
But be careful. Low equity often means higher rates, stricter credit requirements, or mandatory appraisals. If your home’s value has dipped since purchase, consider a portfolio loan from local banks that don’t sell mortgages to Fannie or Freddie. Go farther than a Zestimate.
Click here to find the real value of your home first and always verify with a pro appraisal.
Cash-Out Refinance = The Equity Sweet Spot
Craving cash for a kitchen reno or to crush high-interest debt? Cash-out refinancing demands more skin in the game. Most lenders require at least 20% equity post-refinance, meaning if your home’s worth 400k, you’d need 80k in equity after the new loan. Why the strictness? Cash-out refis are riskier for lenders. You’re borrowing more, and they want a buffer if the market dips.
FHA cash-out refinances require you to maintain at least 20% equity, making them stricter than other FHA refinance types. But exceptions exist. VA loans allow cash-out refinancing up to 100% LTV, yes, zero equity required for eligible veterans. Some credit unions offer “shared equity” refis where investors front cash in exchange for a slice of future appreciation.
How to Build Equity Fast
If you’re equity-light, don’t panic. Move smarter. Start by overpaying your mortgage (even an extra $100 per month can shave years off your loan). Home improvements like kitchens, baths, and curb appeal boost value. Use HomeAdvisor’s Cost Guide to ballpark each project and prioritize the ones with the highest ROI.
If rates drop, recast your mortgage with a lump-sum payment to lower monthly dues without refinancing. Or, play the long game. In hot markets, equity builds naturally. Just avoid cash-out temptations until you’ve hit your target LTV.
Ready to Refinance? Let’s Make It Happen
If you’re thinking about refinancing, don’t go it alone. Whether you’ve got 20% equity, 2%, or just a hunch that now’s the time, we’ll help you cut through the noise and find the smartest path forward. From unlocking cash to lowering your rate or ditching mortgage insurance, we’ll show you how to turn your home’s value into real financial power.