The Quick Read: The FHA cash-out limit is 80% of your home’s appraised (adjusted) value, and it covers the whole new loan, not just the cash you take out. You stay under it by shrinking the loan amount or by raising the value the appraiser can support. Taking less cash, paying closing costs out of pocket, paying down the balance, and clearing any second lien are the main levers.
What Does the 80% Limit Actually Measure?
The limit measures your new base loan against the home’s adjusted value. Base loan means the loan amount before the financed upfront mortgage insurance premium is added. The formula is simple: base loan divided by adjusted value. That ratio is the loan-to-value ratio, or LTV, and on an FHA cash-out it can’t pass 80%.
FHA cash-out estimate
Seeded with an example value, a balance to match, and a round cash request; change any field.
Editable benchmark: 7.32% as of October 22, 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.
Adjusted value starts with the appraisal. The home is worth what the appraiser supports, subject to a few FHA adjustments. Neither your purchase price nor an online estimate sets it. (Zillow doesn’t get a vote.)
Two things trip people up here.
First, the 80% applies to the entire new loan. The new loan has to pay off your current mortgage, any other liens being cleared, and any closing costs you roll in. Whatever is left over is your cash. People often assume the limit applies only to the cash portion. It doesn’t.
Second, a combined limit sits beside it. Combined loan-to-value, or CLTV, adds any second mortgage or HELOC that stays on the home to the new first loan. The CLTV cap is also 80%.
HUD set these limits in Mortgagee Letter 2019-11, which cut the maximum from 85% to 80% to protect the FHA insurance fund from rising loan balances on cash-out refinances. The Handbook 4000.1 update transmittal confirms the same 80% for both LTV and CLTV. Any page still telling you 85% is out of date.
A nationwide mortgage limit also applies to the first mortgage plus any remaining liens combined, and county loan limits apply on top of that. This article never quotes a county figure, because those change every year. Your broker can tell you where your county sits.
How the Loan Is Built, Step by Step
Here’s the order a file moves through. Doing the work in this order keeps you from falling in love with a number that can’t happen.
1. Eligibility first. Before anyone touches LTV math, the file has to clear a few clocks. Across the wholesale programs Lendmire places FHA files with, the FHA cash-out reaches 80% LTV on a home you’ve owned and lived in as your principal residence for 12 months before the case number is assigned. A case number is the identifier HUD assigns to your loan file. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
2. Payment history. The lender documents your mortgage payments over the previous 12 months. Late payments in that window can stop a cash-out file. The exact tolerance depends on the current Handbook and the lender’s guidelines, so ask before you apply.
3. The appraisal sets the denominator. An FHA appraiser produces the value, and the lender derives adjusted value from it. This is the one number you can’t dictate.
4. The numerator adds up everything that stays in the loan. That means the payoff of your current first mortgage, any liens you’re paying off, closing costs you roll in, and your cash out. Payoff statements are required for every existing mortgage.
5. The result gets tested against 80%. If the total base loan lands at or under the ceiling, the structure works on leverage. If it lands over, you adjust the inputs. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Here’s the arithmetic with no dollar signs. Your maximum base loan is 80% of adjusted value. Every item in step 4 has to fit under that ceiling. Take 80% of the appraised value, subtract your payoff, and subtract any closing costs you plan to roll in. What remains is the most cash you can take.
One more point on how HUD counts. HUD’s glossary defines LTV as the Base Loan Amount divided by the Adjusted Value. The financed upfront premium sits on top of the base loan, so it isn’t part of that test. Your loan officer should confirm how it plays out on your specific file.
Over the Cap?
Your Levers, in Order
If your first pass comes out over 80%, you have a handful of moves. They aren’t guarantees, and each has a cost. Here they are in the order most borrowers should try them.
1. Take less cash out. This is the cleanest fix. You don’t have to borrow the maximum. A smaller cash request shrinks the numerator dollar for dollar. If the only reason you’re over is that you asked for a round number, trim it.
2. Pay closing costs out of pocket. Rolling costs into the loan uses up LTV room. Paying them from savings keeps that room open for cash you actually want. The tradeoff is cash at the table.
3. Pay down the balance before you apply. A lower payoff means a lower numerator. This works best if you have cash that would otherwise sit idle, and if you aren’t draining the reserves you need.
4. Deal with second liens. A second mortgage or HELOC that stays on the home counts toward the 80% CLTV. Paying it off with the refinance moves it into the new loan, where it counts again. Think about whether you actually need to keep it. A common misconception says a second mortgage or HELOC gets you past the cap. It doesn’t, because the CLTV cap is the same 80%.
5. Support the value. The appraiser’s judgment decides the number. You can help by making sure the appraiser sees documented improvements and good comparable sales. A tidy list of upgrades with receipts is useful. Pressure isn’t.
6. Wait for the clock. If you’ve owned the home under 12 months, value can be capped at the lesser of your purchase price plus documented improvements or the appraised value. Waiting until the 12-month ownership clock has run frees the appraisal to stand on its own.
Here’s how the levers compare.
| Lever | Effect on LTV | Tradeoff | Best fit |
|---|---|---|---|
| Take less cash | Lowers loan directly | Less money in hand | Round-number requests |
| Pay costs out of pocket | Frees room | Needs cash up front | Borrowers with savings |
| Pay down balance first | Lowers payoff | Ties up cash | Idle cash on hand |
| Clear a second lien | Lowers CLTV | May lose a credit line | Rarely used HELOCs |
| Support the value | Raises denominator | Appraiser decides | Documented upgrades |
| Wait out the clock | Removes purchase-price cap | Delays the plan | Recent buyers |
A simple sensitivity check helps. Take your expected appraised value and ask what happens if it comes in a few percent lower. The ceiling drops by 80% of that shortfall, and every dollar of that drop has to come out of your cash. Build a margin. If your plan only works at the exact appraised number you hope for, the plan is too tight.
What If the Appraisal Comes in Low?
A low appraisal shrinks the denominator, and the maximum loan shrinks with it. You have four real options.
- Accept a smaller loan. The loan amount adjusts to the lower ceiling. You take less cash.
- Ask for a value review. If you have solid comparable sales the appraiser may have missed, your loan officer can submit them. This is a request, and the appraiser makes the call.
- Bring cash. Paying down the balance or covering costs from savings closes the gap.
- Wait or switch products. If the numbers just don’t fit, a different refinance type, or leaving the current loan in place, may serve you better.
Repairs matter too. Condition problems the appraiser flags can affect value, so fix visible issues before the appraiser walks through, not after.
Where the General Rule Breaks
The 80% rule has named edge cases. Know them so you don’t apply the wrong one.
Owned under 12 months. Value can be capped by your purchase price plus documented improvements. The 12-month clock matters more than the LTV math here.
Hawaiian Homelands. Section 247 mortgages are exempt from the 2019 cut, per the HUD letter. This rarely applies, but it’s a real exception.
Older case numbers. Files assigned before September 1, 2019 ran under the old 85% limit. That’s history now.
Inherited homes. Some sources say the occupancy test is waived for inherited property unless it was rented. Don’t rely on that. Ask your broker to confirm it in the current Handbook.
Free-and-clear homes. You can still do a cash-out. The payment-history test simply has nothing to measure.
Not a principal residence. FHA cash-out is for the home you live in. Occupancy decides the leverage, and a second home or rental sits outside this program.
Streamline refinances. The FHA Streamline refinances an existing FHA loan with no appraisal and a limited credit review. It’s a separate product, and the 80% cash-out cap doesn’t govern it. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Where This Fits Among Your Options
Your choice often comes down to what you need the money for and what you already have. Across the wholesale programs Lendmire works with, the FHA rate-and-term refinance with an appraisal reaches 97.75% on a principal residence occupied for the previous 12 months. That’s a different goal: changing the loan without taking cash.
If you want cash and your numbers fit under 80%, the FHA cash-out refinance program is the path. If you already have an FHA loan, Lendmire’s piece FHA Cash-Out LTV Limit When Refinancing an Existing FHA Loan walks through how that changes the picture. If your home is paid off, a separate piece covers the FHA cash-out LTV limit for a paid-off home.
What Staying Under 80% Costs You and Protects
Staying at or under 80% keeps at least a fifth of your home’s value as equity. That cushion matters if values dip.
Cash-out also changes your monthly budget. The CFPB’s research found that a typical cash-out refinance had a longer loan term and larger monthly payment than the mortgage it paid off. The same research warns that a higher cost on the new first lien can lead to much higher borrowing costs than the original loan or a home equity line.
Mortgage insurance is part of the cost picture. FHA charges an upfront premium of 1.75% of the base loan, which is typically financed. It also charges an annual premium between 0.15% and 0.75% of the balance, depending on term, loan 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. Those are program facts, not prices, and the Loan Estimate shows your actual numbers.
If you’re refinancing an FHA loan into a new FHA loan, an upfront-premium refund credit can apply within three years of the original. Ask your broker whether it fits your timing.
Finally, hitting 80% doesn’t mean you’re approved. Credit, income, debt ratios, the new payment, and the appraisal all matter. Across the programs Lendmire places files with, a 580 decision score is the starting point for FHA, and ratios begin at 31/43 and can reach 40/50 with documented compensating factors. All of it is subject to lender guidelines and full file review.
A Pre-Application Self-Check
Run through this before you talk to anyone.
- Have you owned and lived in the home as your principal residence for 12 months?
- Have your mortgage payments over the past 12 months been on time?
- Do you know your current payoff and any second liens?
- Have you listed documented improvements with receipts?
- Have you decided how much cash you truly need, rather than how much you can get?
- Does your plan still work if the appraisal comes in lower than you hope?
- Do you plan to pay closing costs from savings or roll them in?
If you can answer all seven, you can build your own estimate and bring it to a loan officer for a real file review.
Key Terms Defined
LTV (loan-to-value): The base loan amount divided by the home’s adjusted value, shown as a percentage.
CLTV (combined loan-to-value): The same idea, but it adds any second mortgage or HELOC that stays on the home to the new first loan.
Adjusted value: The appraised value after FHA adjustments, used as the denominator in the LTV test.
Base loan amount: The loan before the financed upfront mortgage insurance premium is added.
Case number: The identifier HUD assigns to your FHA file, which starts the ownership and occupancy clocks.
Seasoning: The waiting period a lender wants between events, such as owning and living in the home before a cash-out.
Frequently Asked Questions
Does the 80% limit apply to my cash-out amount or the whole loan?
It applies to the whole new base loan. That includes your payoff, any liens being cleared, and closing costs you roll in, plus the cash you take. Taking less cash is the simplest way to lower the ratio.
Can a HELOC or second mortgage help me get past 80%?
No. The combined limit is also 80%, so a second lien that stays on the home uses up room. Paying it off through the refinance, or reducing it beforehand, frees space.
Do I have to borrow the maximum amount?
No. You can borrow less than the ceiling allows. Many borrowers do, since a larger loan means a larger payment and more mortgage insurance over time.
What happens if the appraisal is lower than I expected?
The ceiling drops, and the loan amount adjusts to it. You can take less cash, bring money to the table, or have your loan officer submit comparable sales for a value review. The appraiser makes the final call.
Can I use FHA cash-out on a rental or second home?
No. Occupancy decides the leverage, and FHA cash-out is for your principal residence.
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 request a scenario review to start.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Lendmire arranges FHA, VA, conventional and jumbo purchase and refinance loans through wholesale lenders; every file is underwritten by the lender under the applicable program guidelines. 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 transmittal
3. HUD Handbook 4000.1 Glossary, Update 17
4. CFPB Office of Research blog on cash-out refinances
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: How an FHA Lender Sizes a Cash-Out Refinance on a Primary Home · Can You Do an FHA Cash-Out Refinance Within the Seasoning Period? · FHA vs Conventional Cash-Out LTV Caps for a Primary Home
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.