How Much Cash a Condo Gets at the FHA Cash-Out Cap After Payoff

The Quick Read: A condo gets whatever is left of the capped loan after the old mortgage is paid off and costs are covered. The FHA cash-out cap is 80% of the appraised value, and that limit applies to the base loan, not to the cash you receive. Condo status does not change the percentage. It decides whether the loan can be made at all, and what the unit appraises for.

What Is the Cap, Exactly?

The cap is 80% of the home’s adjusted value. HUD Mortgagee Letter 2019-11 lowered the limit from 85% to 80%, and HUD had cut it from 95% to 85% years earlier. Plenty of older web pages still repeat the higher numbers. Skip them.

The cap applies to the base loan. The old mortgage balance sits inside that number. A homeowner does not get 80% of value in cash. They get 80% of value as a loan, and the old payoff comes out first.

On the FHA cash-out refinance program, the cap also counts other liens. A second mortgage or a HELOC that stays in place uses up room under the same ceiling. HUD put the change into Handbook 4000.1 with its October 2019 transmittal. Check the current handbook text, since HUD revises it.

Key Terms Defined

Adjusted value: The value the FHA appraisal supports, which is the number the 80% cap is applied to.

Combined loan-to-value (CLTV): The new first loan plus any second liens that stay, divided by adjusted value.

Payoff: The balance owed on the loans being paid off at closing, shown on payoff statements.

Net proceeds: The cash that reaches the borrower after the payoff and costs.

Single-Unit Approval: A route that lets one unit be financed with FHA in a condo project that is not on the approved list.

How Is the Cash Worked Out, Step by Step?

Cash is a leftover. It is never a percentage of value. Here is the sequence a loan officer runs.

1. Start with the appraised value. The FHA appraisal sets the number. The owner’s opinion does not.

2. Apply the 80% cap. That gives the largest base loan the program allows.

3. Subtract liens that stay. If a second lien remains, its balance comes off the room available.

4. Subtract the payoff of the loan being refinanced. Lenders pull payoff statements for every mortgage being paid.

5. Subtract costs. Closing costs, prepaid items and escrow deposits come out unless paid in cash at closing.

6. Add the upfront premium to the balance. The FHA upfront premium is 1.75% of the base loan and is typically financed on top of it. It raises what you owe. It does not add to your cash.

What remains is the cash. A condo with a modest appraisal or thin equity may net little or nothing.

What Does the Waterfall Look Like on a Condo?

Run the numbers in percentages, not dollars. Say a condo appraises at 100% of its value. The cap sets the base loan ceiling at 80%.

Now two cases. In the first, the owner’s payoff is 55% of value. That leaves about 25 points of value under the cap before costs. Costs shrink it, but real cash remains.

In the second, the payoff is 76% of value. Only 4 points sit between the payoff and the cap. Costs can eat all of it. That condo owner may net nothing, and the refinance may not make sense.

A lower appraisal cuts the ceiling fast. Every point of value lost cuts the maximum loan by 0.8 of a point. If the unit appraises 5% light, the ceiling drops 4 points of the original value. On a thin-equity file, that can erase the cash.

What Makes a Condo Different?

The cap is the same. The gates are different. Three things decide a condo file.

Project status. The unit must be in an FHA-approved project or qualify for Single-Unit Approval. HUD’s FHA Connection help page says approved projects get a Condo ID, and approval is needed before individual units are processed. For Single-Unit Approval, the lender submits the loan-level questionnaire, Form HUD-9991, when it requests the FHA case number.

Concentration. FHA limits how many units in a project can carry FHA loans. HUD’s page lists a 10% maximum in projects of ten or more units, and no more than two FHA-insured units in smaller ones. A building over the limit fails the single-unit route. These thresholds can change by HUD notice, so the lender checks current rules.

Appraisal. Condo value rests on comparable sales, often in the same building. Few recent sales in a small building can pull the value down. A lower value means a lower cap.

Status problems tend to surface late. Lenders confirm project standing before the case number for that reason. An owner who learns the building is not eligible after paying for an appraisal has lost money on a loan that cannot happen.

HOA dues also count in the debt-to-income ratio. Equity can be plentiful and the file can still stall if ratios run too high. The base pair across the programs is 31/43, with documented compensating factors reaching 40/50 at the top tier, subject to lender guidelines.

Who Qualifies for Cash-Out on a Condo?

Only an owner-occupied principal residence qualifies. The home must be owned and occupied for 12 months before the case number is assigned. Second homes and rental condos do not fit this program, and occupancy decides the leverage.

Available terms vary by lender, borrower profile, property type, and full underwriting review. HUD’s lower credit tiers exist, but the network does not reach below a 580 decision score. County loan limits also apply, and those change every year.

Payment history matters too. A property with a mortgage needs a record of payments on the current loan, and a plan after forbearance must be completed with on-time payments after it. A condo owned less than 12 months fails the seasoning test. Free-and-clear condos can do cash-out.

Why Does the Cash Come In Lower Than the Formula?

Several things shrink the number. Most borrowers meet at least one.

A delinquent HOA assessment is a condo-specific item. It has to be cleared at closing, and it reduces cash.

Where Does the General Rule Break?

A few edge cases are worth naming.

A project that fails the tests. A building over the concentration limit is not eligible for Single-Unit Approval. An approved project whose approval lapsed cannot proceed until it is recertified.

A second mortgage or HELOC. If it stays, it counts against the cap. Lendmire’s piece How Much Cash an FHA Cash-Out Releases at the LTV Cap walks through that math.

A different FHA product. The Streamline refinance for an existing FHA loan works differently, and the rate-and-term refinance with an appraisal reaches 97.75% on a principal residence occupied for the previous twelve months. Those figures belong to those programs. Do not apply them to cash-out.

Hawaiian Homelands. Section 247 mortgages sit outside the 80% change, per the same HUD letter.

FHA Cash-Out Versus Conventional: How Do They Compare?

Some lenders set higher credit floors or tighter condo rules than the program minimum. A broker can compare options for a given building. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.

What Does the Decision Look Like in Practice?

Start with three questions. What does the building’s project status look like? What is the payoff as a share of likely value? Is the cash still worth it after the longer balance and mortgage insurance?

Mortgage insurance carries two parts. The upfront premium is 1.75% of the base loan. The annual premium runs from 0.15% to 0.75% of the balance depending on term, amount and LTV. On a thirty-year loan above 90% LTV, the annual premium lasts the full term. At or below 90%, it ends after eleven years. A cash-out at the 80% cap sits below that line, which can matter over time. A lender confirms how it applies on the file. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.

The Loan Estimate and Closing Disclosure show the net cash figure, and a consumer refinance follows those disclosure rules. Compare the cash line to the costs line before signing.

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 for the condo you live in. Details here are subject to lender guidelines and full file review, and nothing here is a commitment to lend.

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.

For the program’s current guidelines, see FHA loan programs.

References

1. HUD Mortgagee Letter 2019-11

2. HUD Handbook 4000.1 transmittal

3. HUD FHA Connection condo help