The Quick Read: On an FHA cash-out refinance, the 80% maximum loan-to-value cap sets the ceiling on your new loan, and your cash is whatever is left after the payoff and costs. Your appraised value, your current balance, and any other liens decide the number, not how much you want or how strong your credit is. The best program for your situation depends on how much equity you hold and how long you have lived in the home. Everything here is subject to lender guidelines and full file review, and nothing is a commitment to lend.
Key Takeaways
- FHA caps a cash-out refinance at 80% of the home’s adjusted value, so at least 20% equity stays in the house.
- Cash in hand equals the new loan, minus your payoff, minus costs paid from proceeds.
- The home generally must have been owned and lived in for 12 months before the case number, with a clean payment history on the loan being paid off.
- County loan limits can cap the loan before 80% does on higher-value homes.
- If the cap leaves little cash, a different refinance type or a smaller request may fit better.
What an FHA Cash-Out Refinance Actually Does
An FHA cash-out refinance replaces your current mortgage with one new FHA-insured loan that is larger than what you owe. The new loan pays off the old one and any liens being cleared, and you receive the difference. It is one loan, not a second mortgage stacked on the first.
FHA cash-out estimate
Seeded with an example value, a balance to match, and a round cash request; change any field.
Editable benchmark: 7.18% as of November 5, 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 CFPB’s guide to using home equity describes the tradeoffs plainly. Your monthly payment may rise because you are replacing your current mortgage, and the new loan may stretch the time it takes to pay the home off. Home equity loans, by comparison, are usually repaid over a shorter period.
Borrowers hear “cash-out” and picture a home equity line, but the two are different products. A cash-out refinance is a full replacement of the first mortgage, with its own premium, term, and underwriting.
How the 80% Maximum LTV Sets Your Cash-Out Amount
The cap is 80% of the adjusted value, and it applies to both the loan-to-value and the combined loan-to-value. HUD set that limit in Mortgagee Letter 2019-11, effective for case numbers assigned on or after September 1, 2019. FHA had cut the cash-out maximum from 95% to 85% in 2009, and this change took it to 80%.
Two terms matter here. “Adjusted value” is the appraised value after HUD’s adjustments. “Combined” means any second lien counts toward the 80%. You cannot add a second loan to borrow past the cap.
HUD’s announcement of the change said the cut was meant to reduce risk and align FHA with the cash-out limit the GSEs, Fannie Mae and Freddie Mac, allow. Older pages and some guides still show 85%, and that figure is out of date.
The step-by-step math
Work through it in this order:
1. Start with the appraised value, then apply HUD’s adjustments to reach the adjusted value.
2. Multiply that value by 80%. That is your maximum base loan, subject to the county loan limit.
3. Subtract the payoff on your current first mortgage and any liens being paid off.
4. Subtract closing costs and prepaids that come out of proceeds. What remains is net cash.
The upfront mortgage insurance premium on an FHA loan is 1.75% of the base loan, and it is usually financed. HUD’s premium schedule sits in Appendix 1.0 of HUD Handbook 4000.1. The cap measures LTV on the base loan, so a financed premium generally sits on top of it. Confirm that treatment with your loan officer.
What the waterfall looks like
| Step | What happens | Effect on your cash |
|---|---|---|
| Value x 80% | Sets the maximum base loan | The ceiling |
| Minus first mortgage payoff | Old loan retired | Reduces cash |
| Minus other liens paid | Second mortgage or HELOC cleared | Reduces cash |
| Minus costs from proceeds | Closing costs, prepaids | Reduces cash |
| Remaining amount | Net cash to you | What you keep |
Here is a scenario in percentages. Say your current mortgage balance equals about 60% of the appraised value. The 80% cap leaves roughly 20% of value as gross cash. Costs come out of that, so net cash is smaller still. If you owe 75%, the cap leaves only about 5% of value before costs, and the refinance may leave you with almost nothing.
When Appraisal Value Moves Your Cash
Every dollar of appraisal shortfall cuts your maximum loan by 80 cents. That makes the appraisal the most sensitive input in the whole calculation.
Consider three outcomes on the same home, with the same payoff. A higher appraisal lifts the ceiling and your cash. An appraisal at your expectation delivers the planned amount. A lower one shrinks the ceiling, and because your payoff does not change, each lost 80 cents of ceiling comes straight out of your cash.
That is why a borrower close to the cap should not plan around the highest value they hope for. Plan around a conservative one, and treat anything above it as a bonus.
The Two Ceilings: LTV Cap Versus County Loan Limit
Two ceilings apply, and the lower one wins. The 80% cap is one. FHA’s county loan limit is the other. County loan limits apply and change every year, so no single figure fits every home.
For most homes, 80% binds first. For higher-value homes in high-cost areas, the county limit may bind before 80% does. In that case, borrowing the maximum means borrowing the county limit, and you hold more than 20% equity after closing. HUD publishes the limits, and your loan officer can look up the figure for your county.
Occupancy and the 12-month clock
FHA cash-out is for a primary residence. A home that was owned and lived in for the 12 months before the case number is the standard test. A second home or a rental does not qualify under this program. Occupancy decides leverage, and for a non-owner-occupied property you would look at a different loan type entirely.
Payment history on the loan being paid off
HUD’s Handbook looks at how you paid the existing mortgage. With under six months of history, the loan generally is not eligible. With six to twelve months, payments must have been made when due. With a year or more, the prior twelve months must show payments made within the month due. These rules sit in HUD Handbook 4000.1, and your loan officer should confirm the exact section language for your file.
Named edge cases
- Inherited homes. HUD has historically allowed an exception to the 12-month occupancy test when the borrower has lived in an inherited home since the inheritance. Check the current Handbook text before counting on it.
- Hawaiian Home Lands (Section 247). The 80% change did not apply to mortgages insured under Section 247 of the National Housing Act.
- Manufactured homes. Added installation and site rules apply. Confirm them against the Handbook before assuming the home qualifies.
- Recent purchase or late payment. Either can block a cash-out until the clock resets. A rate-and-term refinance may be the only FHA refinance available in the meantime.
How Underwriting Works
The file goes through full underwriting. That covers credit, income, debts, assets, and the property itself.
Across the wholesale programs Lendmire places FHA files with, a decision score of 580 or higher is where the network starts. HUD has a lower tier, and the network does not reach below 580. Debt ratios begin at 31/43, which means housing cost is 31% of income and total debt is 43%. Documented compensating factors, such as strong reserves or a high credit score, can stretch those limits as far as 40/50 for the strongest files, and the automated finding governs most files.
Mortgage insurance has two parts. 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. On a thirty-year loan with a higher LTV, it lasts for the term. At a lower LTV, it ends after eleven years. A cash-out at the 80% cap falls within the lower-LTV tier, so on a thirty-year term the shorter duration generally applies. HUD cut annual premiums in 2023, as the FHA announcement explains.
This is a consumer mortgage, so you receive a Loan Estimate and a Closing Disclosure. Compare them line by line.
Which Program Fits Your Situation?
The best program for your situation depends on equity, loan type, and what the cash is for. Lendmire is a mortgage broker, so it shops this question across several wholesale lenders instead of pushing one product.
| Your situation | Likely fit | Why |
|---|---|---|
| Existing FHA loan, no cash needed | FHA Streamline | No appraisal, limited credit review, net tangible benefit |
| Existing FHA loan, wants lower balance or term change | FHA rate-and-term | Reaches 97.75% on a primary home |
| Plenty of equity, lived in home 12+ months | FHA cash-out | LTV cap sits below rate-and-term leverage |
| Veteran with entitlement | VA cash-out | May reach higher leverage |
| Loan amount above county limit | Jumbo cash-out | FHA limit would bind |
| Little equity, needs cash | Reconsider the plan | The cap may leave little to borrow |
If the new loan would exceed FHA limits, a jumbo cash-out refinance, which applies when the loan amount exceeds conforming limits, is the alternative lane.
The honest flip point: FHA cash-out is strongest for borrowers whose credit profile suits FHA’s flexibility but who have meaningful equity. If you have strong credit and ample equity, a conventional loan may carry lower insurance costs. If you have little equity, FHA cash-out is usually not the right tool.
When the Cap Leaves Too Little Cash
If your balance already sits near 80% of value, the refinance produces little cash and still carries a new premium and closing costs. Skip it unless another benefit justifies the cost.
Borrowing less than the maximum is also a real choice. A smaller loan means a smaller upfront premium and a smaller balance. If you need a defined amount for a repair or a payoff, request that amount, not the ceiling. The cap is a limit, not a target.
The CFPB’s research on cash-out refinance borrowers found that many use proceeds to pay down credit card and auto debt, and that card balances trended back toward earlier levels over the following year. Converting unsecured debt into debt secured by your home is a real tradeoff. It helps only if the spending habits behind the balances change.
Key Terms Defined
Adjusted value: The appraised value after HUD’s adjustments, which is the figure the 80% cap multiplies.
Combined loan-to-value (CLTV): Your first mortgage plus any other liens, divided by the home’s value.
Base loan amount: The loan before the financed upfront premium is added.
Net cash: What you actually receive after the payoff, other liens, and costs paid from proceeds.
Case number: The FHA identifier assigned to your file, which starts the clock used to measure eligibility.
Common Misconceptions
- “FHA cash-out goes to 85%.” That was the limit before September 1, 2019. It is now 80%.
- “A second mortgage lets me borrow past the cap.” The cap is combined, so other liens count.
- “Better credit means more cash.” Credit affects approval, not the LTV ceiling.
- “I get 80% of my home’s value.” You get 80% of value minus your payoff and costs.
- “Appraised value and adjusted value are the same.” HUD’s adjustments come first.
Frequently Asked Questions
How much cash can I take out with an FHA cash-out refinance?
Up to the 80% cap on adjusted value, minus your payoff, other liens, and costs paid from proceeds. County loan limits can lower the ceiling on higher-value homes. Your appraisal moves the number more than any other input.
Does my credit score change the maximum LTV?
No. The 80% cap applies regardless of score. Your score affects approval and pricing, and across the wholesale programs Lendmire places files with, a decision score of 580 or higher is where the network starts.
Can I have a second mortgage and still do a cash-out?
Yes, but any second lien counts toward the combined 80% limit, and it is generally paid off or addressed in the transaction. Your loan officer can show how it affects the cash left over.
Do I need to own the home for a certain time first?
Generally you must have owned and lived in it as your primary residence for 12 months before the case number, with a clean payment history on the loan being paid off. Inherited homes and some other cases follow different treatment, so confirm against the Handbook.
Is an FHA cash-out the same as a home equity loan?
No. It replaces your first mortgage with one new loan.
Next Step
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. Program details depend on lender guidelines and full file review, and nothing here is a commitment to lend.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s FHA loan programs page.
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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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. CFPB guide to using home equity
2. HUD Mortgagee Letter 2019-11
3. HUD press release on cash-out refinance risk
6. CFPB: CFPB Report Finds Cash Out Mortgage Refinance Borrowers Improve Credit Scores
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 Much Cash Comes Out of an FHA Cash-Out Refinance on a Home With No Mortgage? · How Much Cash Comes Out of an FHA Cash-Out Refinance Before the Appraisal Sets Value? · How Much a Broker Can Charge on an FHA Cash-Out Refinance?
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.