How Much Equity Do You Need to Refinance in Arizona? 2026 Guide

How much equity do you need to refinance in Arizona? It depends on the type of refinance. A rate-and-term refinance, where you're just lowering your rate or changing your term, can be done with as little as 3% to 5% equity, and some government programs need none at all. A cash-out refinance is stricter and usually requires you to keep at least 20% equity in the home. Here's the 2026 breakdown so you know where you stand before you apply.

How much equity do you need for a rate-and-term refinance?

For a straight rate-and-term refinance, most Arizona homeowners need very little equity. On a conventional loan you can often refinance up to 97% of your home's value, which means as little as 3% equity qualifies. If you have under 20% equity you can still refinance, you'll just keep paying private mortgage insurance until you cross that line. The goal here is a lower rate or a better term, not pulling out cash, so lenders are more flexible.

With the average 30-year refinance rate near 6.78% in late July 2026, plenty of Phoenix and Scottsdale homeowners who bought at 7% or higher are checking whether the math works. You don't need a mountain of equity to find out.

How much equity do you need for a cash-out refinance?

A cash-out refinance is where the equity rules tighten up. On a conventional cash-out you can borrow up to 80% of your home's value, so you need to keep at least 20% equity after the new loan. On a $500,000 Scottsdale home, that means your new loan can't exceed $400,000. If you owe $300,000 today, you could pull out up to roughly $100,000 in equity, minus closing costs.

FHA cash-out refinances also cap at 80% of value in 2026, so the same 20% equity cushion applies. VA cash-out is the most generous, allowing up to 90% of value with many lenders, and in some cases higher for qualified veterans. We shop several wholesale lenders at pillarmortgagegroup.com to find the highest cash-out limit your file supports.

Streamline refinances that need no equity at all

If you already have an FHA or VA loan, you may not need any equity to refinance. A VA Interest Rate Reduction Refinance Loan, known as the IRRRL or VA streamline, has no equity or appraisal requirement in most cases. The FHA streamline works the same way for existing FHA borrowers, letting you lower your rate with minimal paperwork and no new appraisal. These programs exist specifically for homeowners who want a lower payment but haven't built much equity yet, which describes a lot of Arizona buyers from the last two years.

How to figure out your home equity

Your equity is simply your home's current value minus what you still owe. Divide your loan balance by the value to get your loan-to-value ratio, then subtract from 100% to see your equity percentage. Say your Phoenix home is worth $450,000 and you owe $360,000. Your loan-to-value is 80%, so you have 20% equity. That's exactly enough for a conventional cash-out and comfortably enough for a rate-and-term.

Keep in mind the number a lender uses comes from an appraisal, not Zillow or your gut feel. Values across metro Phoenix have softened in spots during the 2026 buyer's market, so it's worth getting a real estimate before you plan around a cash-out. If you're weighing a move instead of a refinance, you can browse current listings at Arizona Luxury Property Search to see where prices sit in your area.

Frequently asked questions

Can I refinance with less than 20% equity in Arizona?
Yes. A rate-and-term refinance can be done with as little as 3% to 5% equity on a conventional loan, and FHA or VA streamline refinances often need none. The 20% figure only applies to a conventional or FHA cash-out refinance, where you must keep that much equity after the new loan.

How much equity do I need for a cash-out refinance?
On a conventional or FHA cash-out refinance you generally need to keep at least 20% equity, meaning you can borrow up to 80% of your home's value. VA cash-out refinances allow up to 90% of value with many lenders, so eligible veterans can access more.

Do I need an appraisal to refinance in Arizona?
Usually yes, because the lender needs to confirm your home's value to calculate equity. The main exceptions are VA and FHA streamline refinances, which often skip the appraisal entirely for existing borrowers.

Does refinancing remove PMI?
It can. If your home has gained value and you now have at least 20% equity, refinancing into a new conventional loan can drop private mortgage insurance and lower your payment two ways at once.