The Quick Read: The FHA cash-out refinance caps the whole new loan at 80% of the home’s adjusted value, not just the cash you take out. Whatever is left after the payoff, closing costs, and the financed premium is your cash. The best program for your situation depends on your equity, your payment history, and how long you have lived in the home. Everything here is subject to lender guidelines and full file review.
What Does “Within the Maximum” Actually Mean?
The 80% cap applies to the total new mortgage. It is not 80% of your equity, and it is not a limit on the cash alone. Take the appraised value, apply 80%, and that is the ceiling on the new loan. Everything has to fit under it.
FHA cash-out estimate
Seeded with an example value, a balance to match, and a round cash request; change any field.
Editable benchmark: 7.24% as of October 29, 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.
HUD set that number in Mortgagee Letter 2019-11, which lowered the maximum loan-to-value and combined loan-to-value on cash-out refinances to 80% of adjusted value. Before that it was 85%. HUD’s press release on the change notes the cap had been cut from 95% to 85% back in 2009. If you see a page quoting 85% or 95%, it is out of date.
The practical result: at least 20% equity stays in the home after closing. That is by design. HUD’s stated reason was a stronger equity cushion and lower loss severity if a borrower defaults.
Lendmire’s FHA cash-out refinance program page lays out the program basics. This article walks through how a file gets sized and where it breaks.
Key Terms Defined
Loan-to-value (LTV): The new loan balance divided by the appraised value of the home.
Combined LTV (CLTV): All liens on the home added together, divided by the value. A second mortgage counts here.
Adjusted value: The value HUD uses after applying its own rules to the FHA appraisal. The 80% cap is measured against it.
Upfront mortgage insurance premium (UFMIP): A one-time FHA premium of 1.75% of the base loan, usually financed into the loan.
Cash-out refinance: A new, larger mortgage that pays off the old one and leaves the difference as cash, per the federal consumer-finance regulator’s home equity guide.
How Is the Loan Sized, Step by Step?
Sizing runs in a fixed order. Work it the same way every time and the number stops being a surprise.
1. Start with the appraised value. An FHA appraisal sets the value. Everything else flows from it. Available terms vary by lender, borrower profile, property type, and full underwriting review.
2. Apply 80% to get the ceiling. That ceiling is for the whole new loan, including the financed premium.
3. Subtract the payoff. The new loan first retires your current mortgage, plus any other lien that is not being left in place.
4. Subtract closing costs and prepaids. These come out of the same ceiling. Borrowers often forget this step.
5. What remains is your cash. That is the net figure. It is always smaller than the headline equity number.
6. Check the county loan limit. FHA limits are set by county and change every year. The lower of the 80% test and the county limit controls. For most owners the 80% test binds first. In a lower-cost county with a highly valued home, the county limit can bind instead.
Worked scenario, in percentages only. Say a home appraises at some value and the owner has a mortgage balance equal to 60% of that value. The ceiling is 80%. That leaves a gap of 20 percent of value to cover closing costs, the financed premium, and the cash. If closing costs and premium take up 4 percent, the owner nets about 16 percent of value. Now say the appraisal comes in lower. The balance did not move, but the 80% ceiling dropped with it, and the cash shrinks faster than the value did. That is the leverage effect of a low appraisal.
Working backward works too. If you need a specific cash amount, add it to your payoff and expected costs, then divide by 80% to see the minimum value that supports it. If the appraisal is short of that, you need a smaller cash target.
Why a Second Lien Doesn’t Get You Past 80%
The combined limit is also 80%. A HELOC or second mortgage does not add room above the cap, because the CLTV test counts every lien against the same ceiling. HUD’s handbook treats LTV and CLTV as separate tests, and both sit at 80%.
If you have an existing second mortgage, one of two things happens. It gets paid off with the new loan, which uses up part of your 80%. Or it stays in place, subordinated, and counts toward CLTV. Either way, it takes room from the same pool.
Who Qualifies? The Eligibility Checklist
Across the wholesale programs Lendmire places files with, the screening runs on a short list. HUD sets the baseline. Individual lenders may add their own overlays on top.
- Occupancy and ownership: The home is owned and lived in as your principal residence for the 12 months before the case number is assigned.
- Payment history: Mortgage payments made on time for the prior 12 months, or since the loan began if shorter, and current in the month before disbursement. Lenders document this. A late payment inside that window can mean waiting.
- Credit: The wholesale programs Lendmire works with start at a 580 decision score for FHA. HUD has a lower tier, but the network does not reach below 580. Some lenders set a higher floor.
- Ratios: The base pair is 31/43, housing to total debt, with no compensating factors. Documented compensating factors can reach 40/50 at the top tier. The automated finding governs most files.
- Property: Principal residence only. Investment properties are not eligible for FHA cash-out, and occupancy decides the leverage on any other property type.
- Existing loan: It does not need to be FHA. An FHA cash-out can refinance a conventional loan or a home owned free and clear.
The 12-month rule has an exception worth knowing. For inherited homes, HUD’s handbook has a provision that waives the occupancy period when the borrower has not treated the property as an investment since inheriting it. Confirm the current wording in HUD Handbook 4000.1 before relying on it, because the handbook is updated periodically.
How Does Mortgage Insurance Fit Under the Cap?
FHA charges two premiums. The upfront premium is 1.75% of the base loan. It is usually financed, which means it sits inside the new loan balance and uses part of the 80%. HUD’s mortgagee letter on premium changes is where the upfront figure and the annual schedule come from.
The annual premium runs between 0.15% and 0.75% of the balance, depending on term, loan amount, and LTV. Duration matters. On a thirty-year loan above 90% LTV, the annual premium lasts for the full term. At or below 90%, it ends after eleven years. A cash-out at the 80% cap sits at or below that line, so it falls in the shorter-duration tier. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
The eleven-year duration is a mechanical feature of the program, not a price. Your Loan Estimate shows the actual numbers for your file.
What Lowers Your Maximum in Practice?
The paper maximum and the real maximum are different numbers. Four things pull them apart.
A low appraisal. The 80% is measured against adjusted value from the FHA appraisal. Not an online estimate, not your purchase price. If the appraisal comes in light, the loan shrinks. Ask the lender about a reconsideration request if you have recent comparable sales that support a higher value.
Closing costs and prepaids. They come out of the same ceiling as your payoff and your cash.
The financed premium. It increases the loan balance, so it consumes part of the 80%.
Ratios. Your income and debts have to support the new, larger loan. Some borrowers have plenty of equity and still land below the ceiling because the payment does not fit. Qualifying at the higher balance is a separate test from the LTV test.
FHA Cash-Out vs. the Alternatives
Choosing the best program for your situation starts with what you need the money for and how much equity you want left. Here is how the common options line up on the points that matter.
| Option | Appraisal | Equity left | Typical fit |
|---|---|---|---|
| FHA cash-out | Yes | At least 20% | Moderate credit, needs cash |
| FHA rate-and-term | Yes | Up to 97.75% LTV | No cash needed |
| FHA Streamline | None | Not applicable | Existing FHA loan, no cash |
| Conventional cash-out | Yes | Varies by lender | Stronger credit |
| VA cash-out | Yes | Varies | Eligible veterans |
| HELOC / home equity loan | Usually | Keeps first mortgage | Keep current loan |
Two notes on that table. The FHA rate-and-term refinance reaches 97.75% on a principal residence occupied for the previous twelve months, but it pays out no cash. The FHA Streamline refinances an existing FHA loan with no appraisal and a limited credit review. It requires a net tangible benefit and the premium continues. It does not pay cash. If someone offers you “Streamline cash-out,” the terms are being mixed. They are different products.
Where the General Rule Breaks
The 80% cap is the rule. These cases bend how you apply it.
Free-and-clear homes. If you own the home with no mortgage, you can still do a cash-out. The payment-history test has nothing to measure. The 80% ceiling still applies, so the whole new loan is cash minus costs.
Recently purchased homes. A home bought inside the last 12 months generally fails the occupancy-and-ownership test. A rate-and-term refinance is a different product with different leverage.
Short mortgage histories. If your loan is under 12 months old, stricter seasoning rules apply. Ask the lender before assuming eligibility.
Inherited homes. Covered above. The occupancy period can be waived under the handbook’s conditions.
Rentals and second homes. Standard FHA cash-out is for a principal residence. Occupancy decides the leverage, and an investment property is outside this program.
Section 247. The 80% cut does not apply to loans insured under that section. It is a niche exception and rarely matters.
How Do You Judge “Best” Within the Cap?
There is no single best program. The right fit depends on five things:
- Your goal. A debt payoff, a repair budget, and a large one-time expense each size differently.
- Cash needed. If the cash target is high relative to your equity, the 80% cap may leave you short. Borrowing less or choosing another product may serve you better.
- Equity position. Under 20% equity left after the payoff and costs means no cash at all.
- Credit and ratio profile. Strong credit may open conventional options with different leverage. A score near the FHA floor often points to FHA.
- Cost of mortgage insurance. The premium structure is part of the tradeoff against conventional.
This is where a broker earns its place. Lendmire is a mortgage broker, not a lender, and it works with a network of wholesale cash-out refinance lenders. Programs and overlays differ from one lender to the next. A broker that shops several of them can match the scenario to the program instead of forcing every file through one set of rules. Which lenders will write this loan depends on your credit profile, your property, and your documentation.
What About Using the Cash to Pay Off Debt?
Many borrowers use cash-out proceeds to pay down credit cards and auto loans. The CFPB’s research on cash-out borrowers found credit scores often rose right after the refinance, then gradually slipped, and card balances trended back toward earlier levels within a year.
The lesson is mechanical. Moving unsecured debt into a mortgage turns it into debt secured by your home. The balance can creep back. And the CFPB notes the larger loan may raise your payment and stretch your payoff timeline.
Common Misconceptions
“FHA cash-out goes to 85%.” That figure is outdated. The cap is 80% now.
“80% means I get 80% of my equity.” No. The cap is on the entire new loan against value. Payoff, costs, and the financed premium come out first.
“The cap applies to my Zestimate or purchase price.” It applies to adjusted value from the FHA appraisal.
“I need an existing FHA loan.” You do not.
Frequently Asked Questions
Can I get more than 80% with an FHA cash-out refinance?
No. The 80% cap applies to both LTV and CLTV, so a second lien does not raise it. If you need more than the cap allows, the options are a smaller cash target, a different product, or waiting until the value or balance changes.
Does the county loan limit or the 80% cap control my loan?
The lower of the two controls. The county limit can control in lower-cost areas when a home is valued high relative to the local limit. County limits change every year, so check the current figure for your county.
Do I need to have an FHA loan already?
No. An FHA cash-out can pay off a conventional loan, or it can be done on a home with no mortgage. What matters is the 12 months of ownership and occupancy and the on-time payment history.
What if my appraisal comes in low?
The maximum loan drops with it, and your cash shrinks faster than the value did. You can ask the lender about an appraisal reconsideration with recent comparable sales. Otherwise, borrow less or wait.
Is an FHA cash-out the same as a Streamline?
No. A Streamline refinances an existing FHA loan with no appraisal and a limited credit review, and it pays no cash. A cash-out requires an appraisal and is capped at 80%.
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.
Get Started
Ready to find the right loan for you?
See your offer in seconds. No credit pull, no obligation.
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. HUD Mortgagee Letter 2019-11
2. HUD press release on the LTV change
3. CFPB guide on using home equity
5. HUD Mortgagee Letter 2023-05
6. CFPB’s research on cash-out borrowers
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: Best FHA Cash-Out Refinance Program for Homeowners With an Existing FHA Mortgage · Best FHA Cash-Out Refinance Program When Rolling Closing Costs Into the Loan Balance
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.