The Quick Read: On an FHA cash-out refinance, closing costs either reduce the cash you receive or get added to the new loan balance. A bigger loan means bigger costs, and Florida adds a state tax layer tied to the loan amount. The loan is capped at 80% of the home’s value, so every cost comes out of a fixed pool of equity.
Key Takeaways
- An FHA cash-out loan reaches 80% loan-to-value (LTV) on a home you have owned and lived in for 12 months before the case number is assigned. LTV is the loan balance divided by the home’s appraised value.
- The upfront mortgage insurance premium is 1.75% of the base loan and is usually financed. The annual premium runs between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV.
- Costs that grow with loan size (the upfront premium, state mortgage taxes, title charges) grow fastest on high-value homes.
- County loan limits apply and can cap the loan before the 80% line does.
- Your Loan Estimate shows projected costs. Your Closing Disclosure shows the final ones.
What Counts as Closing Costs on an FHA Cash-Out?
Closing costs are everything you pay to create the new loan, beyond the loan balance itself. On a cash-out refinance, they fall into five buckets.
| Bucket | What it pays for | Paid how |
|---|---|---|
| Lender and origination charges | Processing and underwriting the new loan | From proceeds or financed |
| Appraisal and third-party reports | Value, credit, flood and title work | From proceeds |
| Title and settlement | Title search, insurance, closing agent | From proceeds |
| Government charges | Recording, state taxes on the note and mortgage | From proceeds or financed |
| Prepaids and escrows | Insurance, taxes, interest, starting reserves | From proceeds |
Mortgage insurance sits outside this table. The 1.75% upfront premium is financed on top of the base loan. The annual premium is billed monthly after closing.
Most buyers think of closing costs as a bill paid at the table. On a cash-out, you usually do not write a check. The new loan pays off your old mortgage, covers the costs, and sends you what is left.
How the Loan Is Built, Step by Step
Across the wholesale programs Lendmire places FHA files with, the sequence is consistent. Here is how it runs.
1. Eligibility check. The lender confirms you own and occupy the home as your principal residence. You need 12 months of ownership and occupancy before the case number is assigned. Payment history, credit and income are reviewed.
2. Case number. FHA assigns a case number to the loan. Your 12-month clock is measured back from that date.
3. Appraisal. The appraiser sets the value. For a home owned 12 months or more, the appraised value is the number that counts. A home bought more recently gets tested against the price paid plus documented improvements.
4. Maximum loan. The base loan can reach 80% of the adjusted value. The 1.75% upfront premium is added on top of that base. County loan limits apply and can bind first.
5. Payoff and costs. The new loan pays off your current first mortgage, any other liens you want cleared, and the closing costs.
6. Cash to you. What remains is your cash-out.
The 80% cap is the same on every file, but the cash you receive is not. It depends on the appraised value, what you still owe, and the cost stack.
The program starts at a 580 decision score at the wholesale lenders Lendmire works with. Debt ratios start at 31/43 (housing payment over income, total debts over income). With documented compensating factors, they can stretch to 40/50. The automated underwriting finding governs most files. All of this is subject to lender guidelines and a full file review, and none of it is a commitment to lend.
If you want the program overview first, Lendmire’s FHA cash-out refinance program page covers the basics. The rest of this article focuses on what the closing costs do to your numbers.
Why Is the Cap 80%, and What Counts Against It?
The cap is 80% of adjusted value. FHA used to allow 85%. HUD Mortgagee Letter 2019-11 lowered both the LTV and combined LTV limits to 80%, citing the risk to the FHA insurance fund from growing balances on cash-out loans. The change was folded into the agency’s Handbook 4000.1 through Update 7.5.
The word “combined” matters. The limit counts any other lien that stays on the home. A home equity line or second mortgage that remains in place counts against the same 80%. If you hold one, it either gets paid off in the refinance or it eats into your cash.
Lendmire’s piece Can a High-Closing-Cost Texas Owner Hold a HELOC and Cash-Out Lien? walks through that stacking problem. It is written around a Texas owner, but the lien-counting logic is the same.
One more point on the cap. At 80%, at least 20% equity stays in the home after closing. Costs financed into the loan reduce the cash you receive. They do not create extra borrowing room.
What Does Florida Add to the Bill?
Florida adds a documentary stamp tax on the mortgage, and the tax grows with the loan. The Florida Department of Revenue sets the rate per hundred dollars of debt. The cap that limits the tax on a plain promissory note does not apply to a mortgage that is recorded in Florida.
On a refinance, there is no new deed, so no deed stamps. But there is a new note and a new recorded mortgage, so those taxes apply to the new loan amount. Florida also has a separate intangible tax on recorded mortgages, so confirm that line on your Loan Estimate.
Taxes that scale with debt rise when you cash out. A larger loan means a larger tax. Other states have different recording taxes, and some have none. If you read an out-of-state estimate, it will not match a Florida one.
Title premiums, appraisal fees and insurance escrows also track the home’s size and location. Florida homeowners’ insurance, wind coverage and flood coverage can push the prepaid and escrow bucket up. Those are real costs, and they vary by property.
Lendmire’s article on Florida closing costs on a bank statement HELOC shows how the same Florida charges show up on a different product. Read it if you want a comparison point.
Worked Example: Net Cash After Costs
Percentages tell the story better than dollars here. Picture an owner whose home appraises at 100% of value. They owe 50% of that value on the current mortgage.
| Line | Amount (share of appraised value) |
|---|---|
| Maximum base loan | 80% |
| Existing first mortgage paid off | 50% |
| Gap before costs | 30% |
| Upfront premium (1.75% of the base) | 1.4%, added to the loan |
| Other closing costs | Taken from the 30% gap |
| Cash to the owner | 30% minus other closing costs |
Here is how that reads. The loan balance after closing is about 81.4% of value, because the premium is financed on top of the base. The owner’s cash is the 30% gap minus the other closing costs.
This example uses a modeled owner, and your file will differ. The lender confirms how the premium counts under the cap on your loan. The point is the direction: every cost that comes from proceeds is a dollar you do not receive.
Now picture a different owner with a much higher home value, in a county where the loan limit sits well below 80% of that value. The county limit binds first. The base loan stops at the limit, not at 80%, and the cash-out shrinks accordingly. Some owners in high-cost markets find their equity is large but their accessible cash is small.
Costs still scale with the debt that is recorded. State taxes, title charges and the upfront premium follow the loan. An owner whose loan is held down by a county limit pays less of those than the 80% math would suggest, but the cash is also lower.
Financed, From Proceeds, or Out of Pocket?
You can handle each cost in three ways. Lendmire sees all three on real files.
| Option | How it works | Effect on you |
|---|---|---|
| Financed into the loan | Added to the balance (the upfront premium is the standard case) | Bigger balance, nothing to pay at closing |
| Taken from proceeds | Deducted from your cash-out | Smaller check at closing |
| Paid in cash | You bring money to closing | Keeps the balance and cash-out unchanged |
Whether a cost can be financed depends on the cost and the lender’s guidelines. The upfront premium is the clearest reviewable item. Other costs generally come out of proceeds. The CFPB’s Closing Disclosure page explains the form, which is five pages. It shows whether each cost is paid in cash or financed from the loan amount.
Cash-Out Versus Other FHA Refinances
The cost picture changes by refinance type. Here is how the three compare.
| Factor | Cash-out | Rate-and-term | Streamline |
|---|---|---|---|
| Max LTV | 80% | 97.75% | No appraisal |
| Appraisal | Yes | Yes | No |
| Cash to you | Yes | No | No |
| Existing FHA loan needed | No | No | Yes |
A streamline refinances an existing FHA loan with a limited credit review and a net tangible benefit. The mortgage insurance premium continues. A cash-out refinance starts a new loan with its own upfront premium. It also starts its own annual premium clock. A cash-out does not remove FHA mortgage insurance.
Purchase-side tools such as seller credits and gift funds mostly do not apply here. They exist to help a buyer close a purchase. In a refinance, you are the owner, so there is no seller to negotiate with.
How to Lower What You Pay
You cannot erase these costs, but you can trim them.
1. Compare Loan Estimates. Ask more than one lender or broker for a Loan Estimate and line the lender charges up side by side.
2. Ask about the structure. Some borrowers accept a higher balance to bring less cash to closing. Others pay more up front to keep the balance lower. Neither is free. The cost is built into the balance or the payment.
3. Shop the title and settlement lines. Some third-party services can be shopped, and the Loan Estimate marks which ones.
4. Do not borrow more cash than you need. Every dollar of cost that scales with the loan grows with the loan.
5. Check the loan limit. In a high-cost county, the limit may cap your loan. Knowing this early prevents surprises.
Be wary of any pitch for a “no-cost” refinance. The costs are not gone. They are built into the rate or the balance.
How to Read Your Loan Estimate and Closing Disclosure
The Loan Estimate arrives early. The Closing Disclosure arrives at least three business days before closing, which gives you time to compare it against the estimate and ask questions. Look at five things.
- Loan amount and what it includes. Check whether the upfront premium is added.
- Loan costs versus other costs. Other costs include government taxes and fees, prepaids and escrow deposits.
- Closing costs financed. This shows what is rolled into the loan.
- Cash to close. On a cash-out, this line may show cash coming to you, not going from you.
- Payoff amounts. Confirm the payoff of your existing mortgage and any other lien.
The CFPB’s guide to the Loan Estimate and Closing Disclosure explains how those lines are calculated.
Where the General Rule Breaks
A few edge cases change the standard picture.
- Inherited home. The 12-month occupancy rule can be relaxed for an inherited property, as long as you never treated it as an investment. If you rented it out after inheriting, the occupancy period applies.
- Recently bought home. The value used is the lesser of the price paid plus documented improvements or the appraisal. A fast rise in market value does not automatically count.
- Manufactured homes. They must have been permanently installed on a site for more than 12 months.
- Second homes and rentals. A standard FHA cash-out is for a principal residence. Occupancy decides the leverage.
- Existing FHA loan. A partial credit on the upfront premium may apply on a recent FHA-to-FHA refinance. Ask your loan officer to check HUD’s schedule.
- Credit events. HUD sets waiting periods, such as two years from a Chapter 7 discharge and three years from a foreclosure. Those are HUD rules.
- Handbook changes. Agency handbooks get updated. Confirm the current version before you rely on any single rule.
Is It Worth It? Thinking Through the Decision
A cash-out refinance replaces your whole mortgage. That is the key tradeoff. You are not only borrowing new money. You are resetting the loan on the money you already owe.
The CFPB’s home equity guide says a cash-out refinance can raise your monthly payment and stretch the payoff, because a larger loan replaces the old one. It also notes that the new loan’s terms change and that these loans are usually repaid over 30 years. No option turns 100% of your equity into cash.
Ask yourself four questions.
1. What is the cash for? Home repairs and paying off other debt are common uses. Turning unsecured debt into home-secured debt puts the home at risk if the payments become hard to keep up.
2. How long will I keep this loan? A short stay spreads the upfront costs over fewer years.
3. What does my current loan look like? If your current terms are strong, giving them up has a cost.
4. Is a second lien a better fit? A separate equity line leaves your first mortgage alone. It has its own costs and its own tradeoffs.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Key Terms Defined
Adjusted value. The value FHA uses to set your maximum loan, based on the appraisal and, for recent purchases, the price paid plus documented improvements.
Base loan amount. The loan before the financed upfront premium is added.
Combined loan-to-value (CLTV). All liens on the home added together and divided by its value.
Upfront mortgage insurance premium. A one-time FHA charge of 1.75% of the base loan, usually financed.
Annual mortgage insurance premium. A recurring FHA charge between 0.15% and 0.75% of the balance, billed monthly. On a 30-year loan above 90% LTV it lasts the full term. At or below 90% LTV it ends after 11 years. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Loan Estimate. The early disclosure of projected loan terms and costs.
Closing Disclosure. The final disclosure of loan terms and costs, delivered before closing.
Prepaids. Costs paid in advance at closing, such as insurance, property taxes and interest.
Frequently Asked Questions
Can I roll closing costs into a Florida FHA cash-out?
Partly. The upfront premium is the standard financed item. Other costs generally come out of your proceeds, or you can pay them in cash. What can be financed depends on the lender’s guidelines and your file. The Closing Disclosure shows which costs are financed.
How much cash will I actually receive?
It depends on three things: the appraised value, what you still owe, and the cost stack. Start with 80% of value, subtract what you owe, then subtract costs paid from proceeds. A county loan limit can cut the figure further.
Do I owe Florida taxes on a refinance?
Yes, in most cases. A cash-out puts a new note and a new mortgage on record, so Florida’s documentary stamp tax applies to the new debt. There are no deed stamps, since the property does not change hands. Your Loan Estimate shows the state charges.
Do seller credits or gift funds apply?
Rarely. Seller credits belong to purchases, and you are the owner. Gift funds are a purchase-side tool as well. On a cash-out, the lever you have is the choice of how to pay costs and how much cash to take.
Does a cash-out remove my FHA mortgage insurance?
No. The new loan carries its own upfront premium and starts its own annual premium. The premium schedule depends on term, amount and LTV. Your loan officer can show you the schedule that applies.
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. You can reach the team at 828-256-2183.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. 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 transmittal
3. Florida Department of Revenue, Tax Tip on Documentary Stamp Tax
4. CFPB: What is a Closing Disclosure?
5. CFPB TRID Guide to Loan Estimate and Closing Disclosure
6. CFPB guide to using home equity
This article is part of Lendmire’s FHA Loan series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: FHA Cash-Out vs Conventional for Debt Consolidation With High DTI · Can You Get an FHA Cash-Out After a Conventional Denial? · How Much FHA Cash-Out Costs With a Lower Credit Score vs Conventional
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.