The Quick Read: On a cash-out refinance, FHA caps your total borrowing at 80% of the home’s appraised value. That cap counts every mortgage that stays on the property, not just the new one. Your existing FHA payoff comes out of that room first, and the cash is whatever is left after payoffs and costs. Occupancy, payment history, and credit can still stop the loan before the 80% math matters. Everything here is subject to lender guidelines and full file review.
Key Takeaways
- The cash-out cap is 80% LTV (loan-to-value: the loan balance divided by the home’s value). Streamlines and rate-and-term refinances follow different rules.
- Your old FHA balance uses up room under the cap. It does not add room.
- A second mortgage or HELOC that stays in place also uses up room.
- You need 12 months of ownership and occupancy before the case number is assigned.
- A county loan limit sits beside the 80% cap. Whichever is lower controls the loan. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
What Is a Cash-Out Refinance on an FHA Loan?
You replace your current mortgage with a larger one and keep the difference as cash. When your current mortgage is already FHA, the new loan is a brand-new FHA loan that pays off the old one.
FHA cash-out estimate
Seeded with an example value, a balance to match, and a round cash request; change any field.
Editable benchmark: 7.40% as of October 15, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not an FHA cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the FHA cap on a principal residence with the upfront premium financed, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
An illustration, not a Loan Estimate, an approval, a quote, or a commitment to lend. The rate shown is the weekly Freddie Mac thirty-year conventional benchmark, used as a market reference; an FHA cash-out is priced by the lender at lock, and this is not an FHA cash-out refinance quote. HUD’s cap limits the base loan; the upfront premium is financed on top of the capped base loan; the monthly premium for the first year follows the snapshot’s schedule. Cash available means the base loan the cap permits less the balances retired, before closing costs, which this calculator leaves out. The line figure applies the line program’s combined loan-to-value ceiling to the same value and balance. Taxes and insurance are estimates you can edit. Licensed in sixteen states for consumer mortgages.
That sounds simple. The catch is the ceiling. FHA does not let you borrow against all your equity. It sets a maximum on the total debt compared to the home’s value.
Across the wholesale programs Lendmire places FHA files with, the FHA cash-out reaches 80% LTV on a home you have owned and occupied for 12 months before the case number. The case number is the identifier assigned to your loan file, and the 12-month clock runs back from the day it is assigned. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Many homeowners with an FHA loan want something else: a better term or a smaller payment. The FHA cash-out refinance program is built for the case where you want cash out. If you don’t, a different FHA refinance may fit better. The next section sorts that out.
Which FHA Refinance Do You Actually Need?
Start with your goal. An existing FHA borrower has three main paths, and only one puts cash in your hand.
| Option | Cash to you? | Appraisal? | Equity test |
|---|---|---|---|
| FHA Streamline | No | None | Net tangible benefit |
| FHA rate-and-term | No | Yes | Up to 97.75% LTV |
| FHA cash-out | Yes | Yes | 80% LTV |
A net tangible benefit is a documented, real improvement for you from the refinance. The Streamline refinances an existing FHA loan with no appraisal and a limited credit review. The annual mortgage insurance continues.
The rate-and-term option does use an appraisal. It reaches 97.75% on a principal residence you occupied for the previous twelve months. It’s still not a cash-out loan, so the leverage is far higher.
Streamlines have their own timing rules. Those rules do not carry over to cash-out. Mixing them up is a common way to plan a refinance that the lender can’t deliver.
How the 80% Cap Works, Step by Step
The 80% cap is applied to the whole new loan, payoff included. It is not 80% of the cash you take out.
HUD’s Mortgagee Letter 2019-11 cut the cash-out cap to 80% of Adjusted Value for both LTV and CLTV. It replaced a higher cap, because insured balances on cash-out loans had been growing. The same limit now lives in the handbook, as Handbook 4000.1 Update 7.5 shows. Older web pages that still show a higher figure are out of date. Skip them.
Here is how the pieces fit.
1. Order the appraisal. The appraised value sets the ceiling. Adjusted Value starts from that appraisal, and the lender confirms the figure on your file.
2. Apply 80% to that value. That is the most all your mortgage debt can total.
3. Subtract what must be paid off. Your existing FHA balance comes first. Any second lien that stays in place counts too.
4. Account for the upfront premium. More on that below.
5. Net out costs. What remains after payoffs and closing costs is your cash.
Run it with modeled numbers. Say the appraisal comes in at a figure you’ve modeled, and your existing FHA balance sits at 70% of that value. The cap is 80%. That leaves about 10% of value as room, before costs. The cash lands below that.
Now say a second mortgage worth 5% of value also stays on the home. The room shrinks to about 5%.
That is why the math can disappoint. If the appraisal comes in low, the ceiling falls with it. Your balance doesn’t.
Does the County Loan Limit Matter?
Yes. FHA sets a county loan limit, and it changes every year. The new loan can’t exceed it. So two ceilings apply: 80% of value and the county limit. The lower one controls. On a high-value home in a lower-limit county, the loan limit may bind before the 80% cap does. Ask the loan officer which one applies to your property.
What Counts Toward the Cap?
Anything secured against the home counts.
| Debt | Counts toward 80%? | What happens |
|---|---|---|
| Your existing FHA loan | Yes | Paid off by the new loan |
| Second mortgage you keep | Yes | Uses up room |
| HELOC you keep | Yes | Uses up room |
| Financed upfront premium | Added to the loan | Lender confirms treatment |
A common myth says a HELOC or second mortgage gives you more room. It doesn’t. The 80% is a combined ratio, so a lien that stays in place leaves less room for cash.
In HUD’s handbook glossary, LTV is the base loan amount divided by Adjusted Value. The financed upfront premium is added to the base loan. Ask the loan officer to show how your file treats it.
One more point: the 80% cap does not leave your equity untouched. After closing, at least a fifth of the home’s value stays as your equity.
Eligibility Beyond Equity
Plenty of equity won’t save a file that misses another test.
Ownership and occupancy. At least one borrower must have owned and lived in the home as a principal residence for 12 months before the case number. Lenders typically document occupancy with items like utility bills or employment records. This is where existing FHA borrowers get caught. You may have years of equity, but if you moved in recently or rented the home out, the clock hasn’t run.
Payment history. The lender reviews your mortgage payments over the prior 12 months. Late payments can block cash-out or force a closer look.
Credit. The wholesale programs Lendmire places FHA loans with start at a decision score of 580. HUD has a lower tier, but the network doesn’t reach below 580. Some lenders set a higher floor, so a decline at one lender doesn’t mean every lender says no.
Income and debt ratios. The base pair is 31/43. That means housing cost is 31% of income and total debt is 43%, with no compensating factors. Documented compensating factors can reach 40/50 at the top tier. The automated underwriting finding governs most files.
The appraisal. It can come in below what you expected. Then the whole calculation moves.
Property type. Standard FHA cash-out is for a principal residence. If the home is a rental or second home, occupancy decides the leverage, and the cash-out rules above are for the home you live in.
Where the Rule Bends
The 80% cap is steady. The edges are where files get messy.
- Hawaiian Home Lands (Section 247). The 80% change does not apply to these mortgages, per the HUD letter.
- Forbearance. If you recently finished a mortgage forbearance plan and have only a short run of payments since, HUD’s handbook update calls for manual underwriting on a cash-out. That means a person reviews the file instead of relying only on the automated finding.
- Inherited homes. Renting out an inherited property generally means you haven’t occupied it. Expect to wait out the 12-month occupancy period before cash-out.
- Manufactured homes. Added installation requirements apply. Ask for them early.
- Texas. State homestead rules add their own limits on equity borrowing.
Some secondary sources also describe six-payment or 210-day tests. Those are usually tied to Streamlines. Ask your loan officer which timing rule applies to the loan you’re actually seeking.
What the Cash Costs You
Cash-out on FHA means more mortgage insurance in play. HUD’s mortgage insurance structure charges an upfront premium of 1.75% of the base loan, collected at closing. Most borrowers finance it into the loan.
There’s also an annual premium. In the programs Lendmire works with, it runs between 0.15% and 0.75% of the balance, depending on term, loan amount, and LTV. The duration is the part people get wrong. On a thirty-year loan above 90% LTV, the annual premium lasts the full term. At or below 90% LTV, it ends after eleven years. An FHA cash-out is capped at 80% LTV, well below that 90% line. So on a thirty-year cash-out, the annual premium ends after eleven years instead of running the full term. Shorter terms follow their own schedule. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Here is the hidden effect for an existing FHA borrower. Refinancing into a new loan means a new upfront premium. The new premium is charged on a bigger base loan, because you added cash. So the cash isn’t free. You pay to borrow it, and again in mortgage insurance.
Run this break-even test before you commit. What will the cash do for you? Paying off high-cost debt or funding a repair that protects the home’s value can make sense. Spending it on something that disappears may not. A larger balance also means a larger monthly obligation, and the Loan Estimate lays out the costs of the new loan.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
FHA Cash-Out vs. Other Ways to Tap Equity
This is a toss-up for many homeowners. The right choice depends on your goal.
| Your goal | Likely fit |
|---|---|
| Smaller cost, no cash | FHA Streamline |
| Change terms, keep equity | FHA rate-and-term |
| One lump of cash, one loan | FHA cash-out |
| Keep your current first loan | A second lien (uses cap room) |
On a one-unit primary residence, secondary sources show conventional cash-out landing near the same 80% ceiling. So FHA’s old leverage edge is gone. The remaining differences are credit flexibility and mortgage insurance. A conventional loan may drop mortgage insurance at a certain equity level. FHA’s insurance follows the schedule above. Compare both before you choose.
Key Terms Defined
LTV (loan-to-value): the loan balance divided by the home’s value, shown as a percentage.
CLTV (combined loan-to-value): the same ratio, but with every mortgage on the home added together.
Adjusted Value: the value FHA uses for the cap, built from the appraisal.
Base loan amount: the loan before any financed upfront premium is added.
Case number: the FHA identifier assigned to your loan file. Your 12-month clock runs back from it.
Net tangible benefit: a measurable improvement the borrower must receive, used mainly for Streamlines.
What the Process Looks Like
1. Confirm your goal and that cash-out is the right path.
2. Check ownership and occupancy against the 12-month test.
3. Gather payment history, income, and credit documents.
4. The lender assigns the case number and orders the appraisal.
5. Underwriting reviews credit, income, and the full lien picture.
6. You review the Loan Estimate, then the Closing Disclosure.
7. At closing, old liens are paid off and you receive what remains.
Do the occupancy check first. It costs little to confirm, and it can end the plan early if the 12-month test isn’t met.
Frequently Asked Questions
What is the maximum LTV for an FHA cash-out refinance?
It is 80% of Adjusted Value, measured on all debt secured by the home. That applies to both LTV and CLTV. Whether you reach it depends on the appraisal, your liens, credit, and the county loan limit. Nothing about 80% is a promise of approval or a particular cash amount.
Can I use a HELOC to get above the cap?
No. The cap counts combined debt, so a HELOC or second mortgage that stays in place uses up room. If you pay it off in the refinance, it stops counting against the new cap but becomes part of the new loan. Either way, the total stays under 80%.
Do I have to live in the home for a year?
Generally yes. At least one borrower must have owned and occupied the home as a principal residence for the 12 months before the case number is assigned. Lenders look for documents such as utility bills. A home you rented out or just moved into usually doesn’t pass.
Is an FHA Streamline the same as a cash-out?
No. A Streamline refinances an existing FHA loan with no appraisal and a limited credit review, and you can’t take cash. It requires a net tangible benefit. It follows separate timing rules from cash-out.
Does refinancing remove my FHA mortgage insurance?
Not on a new FHA loan. You pay a new upfront premium, and the annual premium continues under the new loan’s terms. On a thirty-year cash-out, capped at 80% LTV, that annual premium ends after eleven years instead of running the whole term. Moving to a conventional loan is a different path. It may end mortgage insurance, depending on your equity and that program’s rules. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Next Step
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches. Program figures here are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
The 80% cap has been steady for years, so a plan built around your appraisal, your liens, and your 12-month occupancy date will hold up better than one built around a stale figure you found online.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. HUD Mortgagee Letter 2019-11
2. HUD Handbook 4000.1 Update 7.5
3. HUD Handbook 4000.1 Glossary
4. HUD Handbook 4000.1 Update (forbearance and Adjusted Value)
5. HUD FHA Answers: Mortgage Insurance Premium structure
This article is part of Lendmire’s FHA cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: FHA Cash-Out Buyout Documentation for an Existing FHA Loan · FHA Cash-Out Payment History Rules on an Existing FHA Loan · How Many Weeks a VA Cash-Out Takes From a Conventional or FHA Loan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.