The Quick Read: Holding an FHA loan does not exempt you from closing costs on a new FHA cash-out loan. You pay them again, because a cash-out replaces your old loan with a brand-new one. The one real perk is a possible credit toward the new upfront insurance premium, and only if your current loan is young. Whatever you pay, or finance where allowed, comes out of the equity you wanted to borrow.
Key Takeaways
- A cash-out is a new loan. Your old FHA loan is paid off at closing, and a full set of costs comes with the new one.
- The new loan tops out at 80% of the home’s appraised value, so costs and the old payoff share the same ceiling.
- The upfront mortgage insurance premium is 1.75% of the base loan. A partial credit may apply if your current FHA loan is under three years old.
- A streamline refinance is a different product. It pays off the old loan and gives you no cash.
- Everything here is subject to lender guidelines and full file review. Nothing is a commitment to lend.
What Is an FHA Cash-Out Refinance, Really?
An FHA cash-out refinance swaps your current mortgage for a larger one and hands you the difference in cash. HUD’s Handbook 4000.1 is the rulebook behind it. The key idea is simple: the cash is not limited to a specific purpose.
Compare that with a no-cash-out refinance. That loan only pays off the old debt and the costs of the transaction.
Being an “existing FHA holder” confuses a lot of people. The phrase sounds like a streamline trigger. Streamlines do accept existing FHA loans, but they never put cash in your pocket. If you want cash, you are in cash-out territory, and the cash-out rules apply to you like anyone else.
The brokerage’s FHA cash-out refinance program page covers the program basics. Here, the focus is the cost side.
How Is the Loan Underwritten, Step by Step?
Across the wholesale programs Lendmire places FHA files with, the sequence is consistent. Each step changes what you walk away with.
1. Eligibility. You generally need to have owned and lived in the home as your principal residence for the 12 months before the case number is assigned. The lender also looks for a clean recent payment history on the loan you have now.
2. Appraisal. The appraisal sets the value. The 80% cap is applied to that value, so a low appraisal shrinks everything.
3. Credit and income review. The base ratio pair is 31/43 (housing payment and total debts as a share of income) with no compensating factors. Documented factors can stretch that toward 40/50 at the top tier. The automated finding governs most files. A decision score of 580 or higher is where the wholesale programs start.
4. Payoff. The lender gets payoff statements for every mortgage on the home and pays them off from the new loan.
5. Loan Estimate. This is the federal disclosure form that itemizes your costs and shows your estimated cash to close. Compare it line by line against any other quote.
6. Closing Disclosure and signing. You get the final version of those numbers ahead of closing, then sign.
7. Waiting period. On a refinance of your home, you have three business days to cancel before funds are released.
Your decision points are the appraised value, how you handle the costs, and whether the new payment still works. County loan limits apply too, and they change every year.
Does Having an FHA Loan Change Your Closing Costs?
Mostly no. It changes one line: the upfront mortgage insurance premium.
Here is the rule. HUD’s own inspector general reports that an upfront premium refund applies only when you refinance into a new FHA-insured loan within the first three years of insurance. That covers loans endorsed on or after December 8, 2004. Older loans had different windows.
A few details matter:
- It is a credit, not a check. The refund reduces the upfront premium on the new loan. You do not receive it as cash.
- It shrinks with time. The credit is largest right after your original closing and fades as the months pass. Ask your loan officer for the exact percentage on your loan’s age.
- It does not follow you to a conventional loan. Leave FHA, and the credit is gone.
Everything else on the cost sheet is new. Appraisal, title work, recording, lender charges, prepaid items and escrow deposits are charged again. Nothing carries over from your first closing.
Think of it this way. Your existing FHA loan helps a little at the premium line, and not at all on the rest.
What Costs Show Up on an FHA Cash-Out?
Closing costs are the upfront charges for getting the loan and transferring the security interest. The CFPB describes them as the costs of obtaining the mortgage, and the Loan Estimate lists them in groups.
| Cost group | What it covers | Refinance-specific twist |
|---|---|---|
| Lender charges | Origination and processing | Shown on the Loan Estimate |
| Third-party services | Appraisal, title, settlement | Appraisal is required on cash-out |
| Government charges | Recording and related fees | Charged on the new lien |
| Prepaids | Interest and insurance paid ahead | Starts from the new closing date |
| Escrow deposits | Taxes and insurance reserves | Old escrow balance refunded separately |
| FHA insurance | Upfront premium | Added to the loan; credit may apply |
Two items trip people up. First, your old escrow account is closed and refunded, while the new one is funded fresh. They are separate events. Second, prepaid interest depends on your closing date, so the amount moves with the calendar.
This article quotes no dollar amounts for these lines, since they vary by lender, county and loan size. Your Loan Estimate is the number that counts.
How Do the Insurance Premiums Work Here?
FHA insurance has two parts, and neither is a closing cost in the everyday sense.
The upfront premium is 1.75% of the base loan. HUD’s current policy applies it to all mortgages, with narrow exceptions that a cash-out does not meet. It is typically financed, meaning it is added to your balance. A larger balance means a larger premium base, and it also uses up part of your equity cap.
The annual premium runs between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV. It is billed monthly with your payment. On a thirty-year loan above 90% LTV it lasts the full term. At or below 90% LTV it ends after eleven years. Because cash-out loans top out at 80%, that second timeline is the one that usually applies to them.
This is program mechanics, not a price quote. Your loan officer and the lender set your actual charges.
Can You Pay Costs From the Proceeds or Finance Them?
Yes, within the cap. You have two broad routes.
Pay in cash. You bring money to closing. The new loan stays smaller, and your net cash from the equity is higher.
Take it from the loan. The costs are covered by the new loan amount, so your net cash is lower. The loan still cannot exceed 80% of the appraised value.
Picture a home appraised at a round 100 units of value. The most you can borrow is 80. From that 80, the lender subtracts your old payoff, the financed upfront premium, and any costs you choose not to pay in cash. What is left is yours. Run through that math with real numbers from your Loan Estimate, and you will see why net cash is often well below your total equity.
Lender credits, if offered, show up as a separate line on the Loan Estimate. Ask what trade-off comes with them. Costs that are “built in” have to be paid somewhere, whether through the balance or the monthly cost.
For a deeper walk through that question, see Lendmire’s piece Can You Finance All FHA Cash-Out Closing Costs?.
Where Does the General Rule Break?
A few edge cases catch existing FHA holders off guard.
Streamline lookalikes. A streamline refinance keeps your FHA loan going with no appraisal and a limited credit review, but it requires a net tangible benefit and gives no cash. If you need cash, it is the wrong tool. A cash-out never gets streamline treatment on the premium, either.
An older equity cap. You may see 85% quoted online. That is outdated. HUD moved the cash-out cap to 80% in 2019, in line with the conventional cash-out limit. Some mortgages under special programs, such as Hawaiian Home Lands, sit outside that change.
A low appraisal. If the value comes in short, the 80% ceiling drops with it. Your cash-out can shrink, or vanish once the payoff and costs are covered.
Not on a rental or second home. FHA is for your principal residence. Occupancy decides the leverage, so a non-owner-occupied property belongs in a different program.
The three-day pause. Because the loan puts a lien on your home, you can cancel until midnight of the third business day after closing. That right can be waived only for a genuine personal financial emergency, using your own written statement. Funds are generally disbursed after that window ends.
Local costs. Costs vary by state and county, and some states layer on their own charges. The brokerage’s Florida cash-out cost article shows how one high-cost state plays out.
Key Terms Defined
Cash-out refinance: A new mortgage larger than your old one, with the extra paid to you as cash.
Closing costs: The upfront charges for getting the loan and transferring the lien, itemized on your Loan Estimate.
Upfront mortgage insurance premium (UFMIP): A one-time FHA insurance charge of 1.75% of the base loan, usually financed.
Annual mortgage insurance premium (MIP): A yearly FHA insurance charge, billed monthly, that varies by term, loan amount and LTV.
Adjusted value: The appraised value used to measure the 80% cap.
Prepaids: Interest and insurance paid in advance at closing.
Right of rescission: Your three-business-day window to cancel a refinance of your principal home.
What Does the Decision Look Like in Practice?
Start with a plain question: is this cash worth the cost of resetting your loan?
Run this checklist before you apply:
- Total up what you need. Borrow for the purpose, not the maximum.
- Compare your current loan to a new one. A cash-out replaces your current terms. The balance rises, the premium is charged again, and the payment can go up even if nothing else changes.
- Check the age of your FHA loan. If it is under three years, ask about the premium credit.
- Read the Loan Estimate. Look at the estimated closing costs and the estimated cash to close side by side.
- Look at alternatives. A second lien or a home equity line leaves your first loan alone. Whether that suits you depends on the terms of your current loan.
- Plan for the pause. Do not commit cash you need before the rescission window ends.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
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.
Frequently Asked Questions
Do I pay closing costs again if I already have an FHA loan?
Yes. A cash-out is a brand-new loan, so the appraisal, title, recording, prepaids and escrow deposits are charged again. The only carryover is a possible credit toward the new upfront premium if your current FHA loan is under three years old. Your Loan Estimate itemizes everything.
Is the FHA premium credit paid to me in cash?
No. It is a credit applied against the upfront premium on your new FHA loan. It is largest soon after your first closing and shrinks as time passes. Your loan officer can confirm the exact figure for your loan’s age. Refinancing into a conventional loan forfeits the credit.
Can the closing costs be rolled into the new loan?
Often, within the cap. The new loan cannot exceed 80% of the appraised value, so financed costs reduce the cash you receive instead of adding to it. Which items can be financed depends on lender guidelines and the specifics of your file.
Is a streamline cheaper than a cash-out for an existing FHA loan?
A streamline skips the appraisal and uses a limited credit review, so its cost picture differs. But it requires a net tangible benefit and gives no cash. If cash is the goal, a streamline cannot deliver it, and the two should not be compared as equals.
Why is my net cash so much lower than my equity?
Several things come off the top. The 80% cap leaves at least 20% of your home’s value untouched. Then the old payoff, the financed upfront premium and any costs you do not pay in cash are subtracted. What remains is your net cash.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. HUD Handbook 4000.1 Update 7.5 transmittal
3. CFPB Loan Estimate explainer
4. HUD Mortgagee Letter 2023-05
5. HUD press release on the cash-out LTV change
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: Can an FHA Cash-Out Refinance Exceed the County Loan Limit? · FHA Cash-Out Closing Costs Line by Line Under the Cap · FHA Cash-Out Doc Stamps and Closing Costs in Miami-Dade
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.