No, you generally won't need 20% in cash. A refinance runs on today's appraised value, not on what you originally put down. An example makes it concrete. Say you bought for $200,000 with the seller carrying the full amount, and at refinance the home appraises for $300,000 with $200,000 still owed. Your new loan-to-value is about 67%, comfortably within normal limits, so no additional cash is required despite zero money down originally. The same principle holds across programs, none of which care how small the original down payment was. On the purchase side, FHA allows as little as 3.5% down (for borrowers with a credit score of 580 or above), VA allows 0% down for eligible borrowers with sufficient entitlement, and conventional allows as little as 3% down for eligible buyers on a one-unit primary home. Refinance LTV limits are set separately by each program and are different for investment properties, so confirm the caps that apply to your rental scenario. The flip side is worth naming: if values had fallen, a lower appraisal would work against you the same way, since the current appraised value always sets the new LTV. But where the property has appreciated, the equity is already there, and refinancing out of that seller-financed, interest-only arrangement is very doable.