The Quick Read: The lender starts with your home’s appraised value, caps the new loan at 80% of it, then subtracts everything that must be paid off. What is left is your cash. The 80% cap covers the whole new loan, not just the cash you receive. The county loan limit sits on top as a second ceiling, and whichever ceiling is lower sets the maximum.
The Short List
- The cap on an FHA cash-out is 80% of appraised value, and that includes any lien that stays on the home.
- Your cash is the new loan minus payoffs, closing costs, and prepaid items.
- The home must be your primary residence, owned and occupied for 12 months before the case number is assigned.
- The upfront mortgage insurance premium is 1.75% of the base loan, so a bigger loan means a bigger premium.
- You can borrow less than the maximum. Many borrowers should.
What Does “Sizing” Actually Mean?
Sizing is the process of finding the largest loan the file supports and the cash left after the old debt is gone. A cash-out refinance replaces your current mortgage with a new, larger one. You keep the difference. If the home has no mortgage, a cash-out simply pulls equity out for the first time.
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.
The cash can go to anything. That separates it from a no-cash-out refinance, which only pays off the existing loan and the costs of doing the new one.
Think of it as a pie. The appraisal sets the size of the pie. FHA lets the lender use 80% of it. Your old mortgage, any other liens, and the costs of the refinance each take a slice. Cash is whatever slice remains.
Lendmire arranges these through wholesale lenders as part of its FHA cash-out refinance program. The steps below are the order an underwriter works in across the programs we place files with. Every figure is subject to lender guidelines and full file review, and nothing here is a commitment to lend.
The Sizing Sequence in Five Steps
Step 1: Establish the value. An FHA-approved appraiser gives an opinion of value. Appraisals are part of the cash-out process, so plan on one.
Step 2: Apply the cap. Multiply the appraised value by 80%. That is the most the new loan can be. Any junior lien that stays on the home, such as a home equity line, uses up part of that 80%. FHA calls this combined measure CLTV.
Step 3: Check the county limit. FHA sets a maximum loan size for each county, and the limits change every year. If your home is worth a lot, the county limit can be lower than 80% of value. Then the county limit wins. On most files in ordinary markets, the 80% cap binds first.
Step 4: Build the payoff stack. The new loan must retire your current first mortgage. It must also retire any junior liens you want gone. Add the accrued interest on those loans. This is the “payoff stack,” and it comes out of the loan before you see a dollar.
Step 5: Solve for cash. Take the maximum loan, subtract the payoff stack, then subtract closing costs and prepaid items such as the first insurance and tax deposits. The remainder is your cash in hand.
The Formula, Stated Once
The new loan is the lesser of 80% of appraised value or the county limit. If you borrow less than that maximum, the cash shrinks by the same amount.
Here is the logic in percentages, with no dollars. Say the appraisal is 100% of value and your current mortgage balance is 55% of it. The cap lets the loan reach 80%. That leaves 25 points of value before costs. Closing costs and prepaids take a few points of that. Cash is the rest.
The upfront premium works from the base loan. At the full 80% base loan, 1.75% of that equals 1.4% of the home’s value. Whether the premium is financed on top or paid another way is a structuring choice, so ask how your Loan Estimate treats it. For planning, assume it uses up some room.
Which Limit Binds? Three Quick Scenarios
The table shows which constraint decides the loan in each case.
| Scenario | What happens | Binding constraint |
|---|---|---|
| Typical home, moderate balance | 80% of value is below the county limit | The 80% cap |
| High-value home | 80% of value would exceed the county limit | County loan limit |
| Appraisal lands below expectations | Value falls, so 80% of it falls with it | The 80% cap, on a lower number |
The third row catches people off guard. The loan is resized after the appraisal. Suppose you expected a value that would leave plenty of cash. If the appraiser comes in lower, every figure drops, and the cash drops faster than the value does. That is because your payoff stack stays fixed while the cap shrinks.
The 80% limit comes from HUD Mortgagee Letter 2019-11, which lowered the cap for both LTV and CLTV. FHA said it wanted to limit the risk of rising balances on cash-out loans. Before that change, the cap was higher. The letter carves out Hawaiian Homelands loans, which follow different rules.
County limits are published each year. HUD’s announcement of the annual FHA loan limits explains that limits run between a floor and a high-cost ceiling. Your lender looks up your county’s number. This article does not quote it, because it changes.
Who Qualifies on the Primary-Home Side?
Cash-out sizing is only half the story. The file must also clear the eligibility tests.
Occupancy and ownership. The home must be your principal residence. At least one borrower must have owned and lived in it for 12 months before the case number is assigned. Lenders typically confirm occupancy with items like employment records and utility bills.
Payment history. The lender reviews how you paid your mortgages over the past year, or since you got the loan if that period is shorter. Late payments draw scrutiny. A recent clean record matters.
Credit and income. Across the wholesale programs we place with, a 580 decision score is where FHA lending starts, and some lenders set a higher floor. The ratios are a base pair of 31/43, meaning housing cost over income and total debt over income. Documented compensating factors, like savings or a strong payment history, can stretch that to 40/50 at the top tier. The automated underwriting finding governs most files.
The underwriter tests the new payment, which includes mortgage insurance, taxes, and homeowners insurance. A large loan that fits under the cap can still fail on income.
What the Mortgage Insurance Does to the Number
Every FHA loan carries two premiums. The upfront premium is 1.75% of the base loan. The annual premium runs between 0.15% and 0.75% of the balance, depending on term, loan amount, and LTV.
Two facts matter for a cash-out. First, the premium is figured on the whole loan, not only the cash you pull out. A borrower who refinances to release a modest amount still pays on the full balance. Second, a cash-out lands at or below 90% LTV because of the 80% cap. On a thirty-year loan at or below 90%, the annual premium ends after eleven years. Above 90%, it lasts the full term. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Where the General Rule Breaks
The 80% cap and 12-month tests cover most files. These situations behave differently.
- A second home or rental. Cash-out under this program is for a primary residence only. If you own a second home, how a lender sizes a conventional cash-out refinance on a second home covers that path.
- Under 12 months owned. The occupancy clock has not run. A shorter history can also shrink the payment record the lender can document.
- An inherited home. Some lenders treat the occupancy test differently here. Confirm the exact treatment with the lender before assuming it applies.
- A home with no mortgage. This still counts as cash-out. The payoff stack is zero, so more of the 80% becomes cash, less closing costs.
- A manufactured home. It has its own requirements, including how long it has been permanently installed on its site.
- A HELOC or second lien that stays. It shares the 80%, so it shrinks your room instead of adding to it.
- A credit event. HUD’s waiting periods apply: two years from a chapter 7 discharge and three years from a foreclosure. Those are HUD’s rules, not a promise from any lender.
- A multi-unit home. FHA allows one to four units on a primary residence. If you are weighing cash-out against a renovation loan, see Lendmire’s piece FHA Cash-Out vs 203k Refinance on a 2-4 Unit Primary Home.
- A streamline. The FHA Streamline refinances an existing FHA loan with no appraisal and a net tangible benefit test. It gives no cash. The FHA rate-and-term refinance, with an appraisal, reaches 97.75% on a primary home occupied for the previous twelve months.
Do You Have to Borrow the Maximum?
No. The maximum is a ceiling. Many borrowers do better taking only what the project needs.
The reason is cost. Every extra dollar borrowed adds to the premium base and extends the payoff. The CFPB’s guide to using home equity notes that a cash-out can lengthen payoff time and raise the monthly payment, because a larger loan replaces the current one and the loan terms reset. It also says no option converts 100% of your equity into cash.
How Borrowers Actually Use the Cash
In a CFPB report on cash-out borrowers, paying off other bills or debts was the most common reason. More than half of cash-out borrowers chose it in the earlier period studied, and more than 40% did in the later one. Home repairs and construction came second.
The same report found credit scores rose sharply after a cash-out, then slipped gradually but stayed above pre-refinance levels. Card balances tended to drift back toward earlier levels. Wry but true: paying off cards with your house works best when the cards stay paid off.
Debt consolidation carries a real tradeoff. Unsecured debt becomes debt secured by your home. If payments become unsustainable, the home is at risk, a point the CFPB raises in its report on cash-out refinances and debt paydown.
A common pattern on files like these: the borrower arrives with a cash target in mind, the appraisal comes back a little lower, and the plan has to shrink. Run the numbers at a conservative value first. If the project still works at a lower appraisal, you have room. If it only works at the best case, the margin is too thin.
Working Backward From the Cash You Need
Reverse sizing is simple and rarely explained. Start with the cash you want. Add your payoff stack and your estimated closing costs and prepaids. That total is the loan you need.
Now divide that loan by 0.80. The result is the appraised value you need for the 80% cap to allow it. If your expected value falls short of that, the target is out of reach as written. You can lower the cash goal, pay down a junior lien, or wait for the value to grow.
What to Have Ready
- Your latest mortgage statement, plus statements for any junior liens or lines.
- Proof of income and your recent tax and employment records.
- Proof you live in the home, such as utility bills.
- A written list of what the cash is for.
- Your homeowners insurance details.
The lender may ask for more. The goal is to settle the number early, before the appraisal and underwriting reopen it.
Key Terms Defined
CLTV: Combined loan-to-value. It adds every loan secured by the home and divides by the appraised value.
Payoff stack: The set of existing loans the new mortgage must retire, plus accrued interest.
Base loan amount: The loan before the financed upfront premium is added. FHA figures the premium on it.
Prepaids: Items collected at closing in advance, such as the first insurance and tax deposits.
Adjusted value: The appraised value FHA applies its cap to.
Case number: The FHA identifier assigned to the loan. The 12-month occupancy clock is measured back from it.
Net tangible benefit: A test for streamlines showing the borrower gains something real from the new loan.
Frequently Asked Questions
Can I get 80% of my home’s value in cash?
No. The 80% cap covers the entire new loan. Your current mortgage, any liens that stay, and closing costs all come out of that same envelope. Cash is what remains, and it can be well below 80% of value.
Does a better credit score raise how much I can borrow?
Not on the cap itself. The 80% limit applies regardless of score. A stronger profile helps you qualify and may widen your choice of lenders. Some lenders also set a floor above FHA’s, so the practical minimum varies by lender.
What if the appraisal comes in low?
The loan is resized to the lower value. Because your payoffs do not change, the cash falls by more than the value did. Ask the lender to run the numbers at a conservative value before you commit to a plan.
Is a cash-out the same as a HELOC?
No. A cash-out replaces your first mortgage with a new one. A home equity loan or line leaves the first mortgage in place. If you keep a line while refinancing, it counts toward the 80% CLTV.
Does cash-out carry a higher upfront insurance premium?
No. The upfront premium is 1.75% of the base loan, the same as on most FHA mortgages. The annual premium depends on term, loan amount, and LTV. Because the loan is bigger, the dollars of premium are bigger even though the percentage is the same.
Weighing It Against Keeping Your Loan
Sizing is only the first question. The harder one is whether a larger, reset loan beats the one you already have.
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 your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. 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 announcement of annual FHA loan limits
3. CFPB guide to using home equity
4. CFPB cash-out press release
5. CFPB: CFPB Cash Out Refinances and Paydown Behavior of Non Mortgage Debt Balances
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: FHA Simple Refinance vs FHA Streamline When Home Value Rose · How the FHA MIP Refund Is Calculated on an FHA-to-FHA Refinance · Can You Qualify for an FHA Cash-Out Refinance With Thin Credit?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.