The Quick Read: Every FHA cash-out loan carries two mortgage insurance charges. The upfront premium is 1.75% of the base loan, and it is either financed or paid in cash. The annual premium is paid monthly, and it runs between 0.15% and 0.75% of the balance depending on term, loan amount and LTV. Having equity does not remove either charge. Subject to lender guidelines and full file review.
Key Takeaways
- The upfront premium is figured on the base loan, before the premium itself is added.
- It is all financed or all paid in cash. A split is not allowed.
- The annual premium goes into the monthly housing payment, and lenders count it when they test your ratios.
- A cash-out at the 80% LTV cap lands in the tier where the annual premium ends after eleven years on a thirty-year loan.
- A new loan resets the premium schedule. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
What Makes an FHA Refinance a “Cash-Out”?
A refinance is cash-out when the proceeds are not limited to paying off the old loan and closing costs. You take equity out, and you can spend it on anything. A refinance that only pays off the existing mortgage and its costs is no-cash-out. The two follow different rules.
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.
Across the wholesale programs Lendmire places FHA files with, the cash-out sits at the top of the risk ladder. It reaches 80% LTV, on a home you have owned and lived in for 12 months before the case number is assigned. The Streamline and the rate-and-term loan are built on a different track. The Streamline needs no appraisal. The rate-and-term loan reaches 97.75% on a principal residence occupied for the previous twelve months. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
If you want the program-level details, Lendmire’s FHA cash-out refinance program page lays out how these loans are arranged.
How Is the Upfront Premium Counted?
The upfront premium is 1.75% of the base loan, and a cash-out refinance gets no exemption from it. HUD Mortgagee Letter 2023-05 sets it as a percentage of the Base Loan Amount. That is the loan before any financed premium is added.
Here is the calculation chain the lender runs, in order:
1. Set the base loan. This is the amount needed to pay off your liens and any costs you choose to roll in, held to the 80% cap and the county loan limit. The lower ceiling controls.
2. Figure the premium. The lender takes 1.75% of that base loan.
3. Choose how to pay it. You finance it or you pay it in cash. It is all one or all the other.
4. Build the final note. If you finance, the premium is added on top. Your note is larger than the base loan.
5. Set the annual premium. It comes from the term, the base loan amount and the LTV.
One point needs care. HUD’s older handbook language treats the statutory loan limits and LTV limits as not including the upfront premium. Even so, how a given lender’s worksheet places the financed premium against the 80% cap is something to confirm, not assume. Ask the loan officer to show you the final note amount next to the cap before you rely on a cash figure. The governing text is the HUD Handbook 4000.1.
How Is the Annual Premium Counted?
The annual premium is a monthly charge added to your housing payment. The CFPB explains that FHA mortgage insurance is required on all FHA loans. It costs the same whatever your credit score, and it has an upfront part and a monthly part.
Two things follow in a real file:
- It counts in your ratios. Lenders include the monthly premium in the housing payment when they test debt-to-income. The base ratio pair is 31/43. With documented compensating factors it can reach 40/50 at the top tier. The automated finding governs most files.
- Credit does not lower it. A higher score may help you qualify, but it does not change the premium schedule.
Financing the upfront fee raises the loan amount and the total cost, as the CFPB notes. A larger balance also means a slightly larger principal-and-interest payment. Both effects are small month to month. They add up over a long hold.
How Long Does It Last on a Cash-Out?
On a thirty-year cash-out at the 80% cap, the annual premium ends after eleven years. That is the tier for loans at or below 90% LTV. Above 90% LTV, the premium lasts for the term. HUD’s 2013 mortgage insurance letter set the eleven-year rule at 90% LTV or below, and the later schedule keeps it. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
| Situation | Annual premium duration |
|---|---|
| Thirty-year loan, 90% LTV or below | Ends after eleven years |
| Thirty-year loan, above 90% LTV | Lasts for the term |
| Cash-out at the 80% cap | Falls in the eleven-year tier |
| New cash-out replacing an older FHA loan | New schedule, new clock |
The reset matters. Say you have paid FHA premiums for six years and refinance into a new cash-out. The clock starts over on the new loan. You owe eleven new years, not five.
Don’t expect the automatic cancellation at a set LTV to rescue you either. It applies only to older loans whose case numbers fall before HUD’s cutoff for the current duration rules. A new cash-out never qualifies. HUD’s cancellation guidance also bases LTV on the principal balance without the upfront premium, and it does not use a new appraisal. A higher appraisal later does not end the premium. See HUD’s cancellation guidance for the rule.
What Does the Net-Cash Waterfall Look Like?
The cash you receive is the maximum loan minus everything it has to cover. The insurance premium is one of the lines that shrinks it. No dollar amounts here, because every file differs. The order is what matters.
| Step | What happens |
|---|---|
| Appraised value | Sets the ceiling |
| Apply the 80% cap | Gives the maximum loan |
| Check the county limit | The lower ceiling controls |
| Subtract payoff of liens | Existing mortgage and other liens |
| Subtract costs rolled in | Closing costs financed or deducted |
| Handle the upfront premium | Financed (added on top) or paid in cash |
| Result | Cash to you |
A common error is treating the 80% cap as cash in hand. The cap is the maximum loan. The payoff and costs come out first. If you finance costs, they raise the balance and use up room under the cap. If you pay them in cash, the balance stays smaller.
Financing a cost doesn’t make it free. You still pay it, through a larger balance.
Financed or Paid in Cash?
| Factor | Financed | Paid in cash |
|---|---|---|
| Loan balance | Larger | Smaller |
| Cash needed at closing | Less | More |
| Cash you receive | Same or lower | Often higher |
| Monthly payment | Slightly higher | Lower |
| Cap room used | More | Less |
Most borrowers finance it. That is a reasonable choice when cash is the whole point of the loan. It adds to the balance, so it is a trade, not a saving.
What If You Already Have an FHA Loan?
A borrower refinancing out of an FHA loan within three years may get a refund credit toward the new upfront premium. The credit shrinks every month. After 36 months, nothing remains. The exact schedule is in Handbook 4000.1, and it is worth reading from that table, not from a blog.
Two mechanics to know. First, the refund is a credit against the new premium. It is not a check to you. Second, the handbook does not address refunds when you refinance into a non-FHA loan.
Lendmire’s piece Cash-Out Refinance Mortgage Insurance Rules When Leaving FHA covers the details.
Where the General Rule Breaks
The 12-month rule and the full-premium rule have exceptions. These are the ones that come up in files.
- Inherited home. The 12-month occupancy test is waived unless the home was rented. HUD’s refinance reference guide describes the inheritance and free-and-clear logic. It is an older page, so use it for the logic only, and check current rules.
- Free-and-clear home. A home with no mortgage can still be refinanced as a cash-out. The premiums still apply.
- Bought under 12 months ago. The lesser of appraised value or purchase price is generally the LTV base.
- Three- and four-unit homes. Older HUD material describes a self-sufficiency test and reserves. Verify what the lender applies today.
- Second homes and investment properties. Not eligible. FHA cash-out is for the home you live in.
- Payment history. Lenders look at the last 12 months on the loan being paid off. A short history faces tighter tests.
- Streamline. It has no cash-out and no appraisal-based LTV calculation. It is a different loan.
The premium exceptions themselves are narrow. They cover Streamlines of older FHA loans and a few special programs. A standard cash-out is not among them.
Is FHA Cash-Out Worth the Premium?
It depends on what you compare it to. At 80% LTV, a conventional cash-out generally carries no private mortgage insurance. FHA charges both premiums at the same equity. That gap is the price-comparison trap.
FHA tends to make sense when a lower credit score blocks a conventional loan, or when you need the program’s ratio flexibility. A homeowner with strong credit and 20% or more equity often compares well on a conventional file. A debt-consolidation borrower should also run the ratios. Debts paid at closing drop out of the debt-to-income test. The larger mortgage payment, with the monthly premium inside it, replaces them.
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
Upfront premium (UFMIP): A one-time charge of 1.75% of the base loan, financed or paid in cash.
Annual premium (MIP): A yearly insurance charge collected in monthly installments and added to the housing payment.
Base loan amount: The loan before any financed premium is added. The upfront premium is figured on this number.
PMI: Private mortgage insurance on conventional loans. It is not the same as FHA premiums, which go to HUD.
LTV: Loan-to-value. The loan divided by the home’s appraised value.
Frequently Asked Questions
Does the financed premium count against the 80% limit?
It depends on how the lender’s worksheet treats it, so ask for the final note amount shown beside the cap. Handbook 4000.1 is the controlling text. Confirm before you plan around a cash figure.
Can a strong credit score lower my FHA mortgage insurance?
No. The CFPB confirms FHA mortgage insurance costs the same regardless of credit score. Credit may help you qualify. It does not change the premium schedule.
Will 20% equity let me skip mortgage insurance on an FHA cash-out?
No. That holds for many conventional loans, not FHA. FHA charges both premiums even at the 80% cap. A cash-out at that cap does fall in the eleven-year tier on a thirty-year loan.
Does refinancing again reset the annual premium?
Yes. A new loan starts a new schedule from its own case number. If you move from an older FHA loan within three years, you may get a refund credit toward the new upfront premium. After that, nothing is credited.
Can I pay part of the upfront premium in cash and finance the rest?
No. It is entirely financed or entirely paid in cash. Paying in cash adds to your closing cash. Financing raises your balance and uses cap room.
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. Call 828-256-2183 or request a quote. Lendmire is a mortgage broker, and every program is subject to lender guidelines and full file review. Nothing here is a commitment to lend.
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 Mortgagee Letter 2023-05
2. CFPB
3. HUD ML 2013-04 (hosted by FHFA)
4. HUD mortgage insurance cancellation guidance
5. HUD’s refinance reference guide
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 Cash-Out Refinance Sizes the Loan Versus a Streamline · How to Get Out of FHA Mortgage Insurance as a 2-4 Unit House Hacker · Can You Do an FHA Cash-Out Refinance Within the Seasoning Period?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.