The Quick Read: FHA runs one cash-out refinance, and the right fit depends on whether you want cash or just a different loan. Rolled-in closing costs sit inside the same 80% ceiling as your cash, so every cost you finance shrinks the check you receive. The no-cash-out options, the Streamline and the rate-and-term refinance, play by different rules. Which one is best for your situation depends on your goal, your current loan, and how much equity you hold.
Key Takeaways
- FHA cash-out tops out at 80% of the home’s value, and financed closing costs use part of that room.
- You must own and live in the home as your primary residence for 12 months before the case number.
- The Streamline and the rate-and-term refinance do not give you cash, but they treat costs differently.
- Rolling costs in lowers what you bring to the table. It raises what you owe and what you pay in interest.
- Smaller cash-out requests leave more room for costs and keep the new balance lower.
Which FHA Refinance Is Right for You?
FHA does not have a menu of cash-out “programs.” It has three refinance types, and you pick the one that matches your goal. Cash-out is the only one built to hand you equity.
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.
| Option | Cash to you | Appraisal | Ceiling |
|---|---|---|---|
| Cash-out | Yes, the purpose | Yes | 80% LTV |
| Rate-and-term | No | Yes | 97.75% on a primary residence |
| Streamline | Not the goal | No | Existing FHA loan, with a net tangible benefit |
LTV means loan-to-value: the loan balance as a percentage of the home’s value. The rate-and-term figure applies to a principal residence you have occupied for the previous twelve months. The Streamline refinances an existing FHA loan with a limited credit review. It requires a net tangible benefit, meaning the new loan has to leave you measurably better off.
Here is the practical split. Need cash for a project, debt payoff, or another large expense? Cash-out is the lane. Just want a different loan and no cash? The other two keep the 80% ceiling out of your way.
Lendmire’s FHA cash-out refinance program page lays out how these files are arranged. Lendmire is a mortgage broker. It places FHA loans through wholesale lenders and does not lend itself. Program figures here are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
How Does an FHA Cash-Out Refinance Work, Step by Step?
A cash-out refinance replaces your current mortgage with a larger one. The new loan pays off the old lien, pays the closing costs, and sends the rest to you. Here is the order of events.
1. Eligibility check. The home must be your owned, owner-occupied primary residence. You must have owned and lived in it for 12 months before the case number is assigned. A case number is the identifier FHA assigns to your loan file.
2. Appraisal. An appraiser sets the home’s value. The 80% ceiling is applied to that value.
3. Underwriting. The lender reviews credit, income, and debts. Lenders review your payment history on the existing loan too.
4. Loan Estimate. The lender shows your estimated closing costs and whether any are financed into the loan.
5. Closing. The new loan pays off the old one. Costs come out next. The remainder is your cash.
That last step is where rolling costs in matters. The order is payoff, then costs, then you. Whatever the costs take, you do not get.
What Happens to Closing Costs When You Roll Them In?
Rolled-in costs become part of the new loan balance. They do not disappear. They also compete with your cash for the same space under the 80% ceiling.
Think of the ceiling as a box. Three things go in it: your payoff, your financed closing costs, and the cash you want. If the box is nearly full, adding costs means taking less cash or borrowing less.
Picture a homeowner whose current balance already sits close to 80% of value. Almost no room is left for cash. Financing costs there would use up what little remains. Now picture a homeowner who owes about half the home’s value. That box has far more space, so costs and a meaningful cash amount both fit.
The upfront mortgage insurance premium, 1.75% of the base loan, is financed too. Your Loan Estimate shows the final loan amount, and your loan officer can walk you through that line.
Rolling costs in lowers your cash at the table but increases your overall cost, because you pay interest on them. See the Consumer Financial Protection Bureau’s Closing Disclosure explainer. It also separates two numbers people mix up: total closing costs and “Cash to Close.” They are different figures.
Pay Now, Roll In, or Deduct From Proceeds?
You have three ways to handle costs on a cash-out refinance. Each moves a different number.
| Method | Cash you bring | New balance | Cash you receive |
|---|---|---|---|
| Pay out of pocket | Most | Lowest | Full amount requested |
| Roll into the loan | Least | Higher | Same amount, but ceiling room is used |
| Deduct from proceeds | None | Same as requested | Lower |
Paying out of pocket keeps the balance smallest and your lifetime interest lowest. It needs cash at the table, which many cash-out borrowers would rather not spend.
Rolling in keeps your wallet closed, but the balance grows. If the ceiling limits you, this method can force a smaller cash request.
Deducting from proceeds is the simplest in practice. The lender subtracts costs from the check. You get less, the balance stays where you set it, and nothing extra accrues interest.
A fourth idea gets confused with all of these. A “no-closing-cost” refinance does not erase costs. They get built into the loan terms or the balance, so you pay them over time instead of at the table. Treat the phrase as marketing, then read the Loan Estimate to see where the costs went.
The question is simple: where do you want the cost to land, in your pocket today, in your balance for years, or out of your cash check?
What the Lender Checks Before Approving a Cash-Out
Underwriting is where the 80% ceiling meets your actual file. Across the FHA programs Lendmire places files with, the common framework looks like this, subject to each lender’s guidelines.
Credit. The wholesale programs start at a 580 decision score. That is the figure the network works from. Some lenders set a higher floor, and the final score that counts depends on the lender.
Debt ratios. A ratio compares your monthly debts to your income. The base pair is 31/43: housing costs at 31% of income, total debts at 43%. Documented compensating factors, like strong reserves or a long job history, can stretch that toward 40/50 at the top tier. An automated underwriting finding governs most files.
Occupancy and ownership. The home must be your primary residence. A non-occupant co-borrower can help on an FHA purchase, but their income does not count toward qualifying for a cash-out.
Property. The appraisal sets the value that the ceiling uses. A low appraisal shrinks every number in the box.
A bigger balance changes your qualifying picture. A larger loan usually means a larger payment, which pushes your ratios up. That is one more reason to borrow what you need rather than the maximum.
How Does Mortgage Insurance Work on a Cash-Out?
FHA mortgage insurance has two parts, and both apply to a cash-out. The upfront premium is 1.75% of the base loan, and it is typically financed. The annual premium ranges from 0.15% to 0.75% of the balance, depending on the term, the loan amount, and the LTV.
How long the annual premium lasts depends on the loan too. On a thirty-year loan above 90% LTV, it runs for the full term. At or below 90%, it ends after eleven years. Because a cash-out tops out at 80%, it falls in the lower band on a thirty-year loan. Your lender confirms the exact schedule on your file. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Mortgage insurance does not cancel simply because you reach 20% equity. FHA insurance follows its own schedule, which is set by HUD Mortgagee Letter 2023-05. A cash-out also replaces your old loan with a new one, so the clock starts fresh on the new insurance.
Where Does the 80% Limit Come From?
The 80% cap is not a lender preference. It is an FHA rule, and it applies to cash-out only. HUD Mortgagee Letter 2019-11 cut the maximum LTV and combined LTV on cash-out refinances to 80% of adjusted value. It took effect for case numbers assigned on or after September 1, 2019.
That cut is why older advice about borrowing a bigger share of the home’s value is out of date. HUD’s stated reason was protecting the FHA insurance fund from rising insured balances on cash-outs. The cap now sits in HUD’s Handbook 4000.1, the master rulebook for FHA lenders.
Combined LTV means your first mortgage plus any other liens, measured against the home’s value. Any second loan on the home counts toward the same 80%.
Where the General Rule Breaks
The standard path has several edge cases that catch borrowers off guard.
A paid-off home still counts as cash-out. If you own the home free and clear and take equity out through an FHA loan, the handbook treats that as a cash-out. The same 80% cap applies.
A non-FHA loan can be refinanced into FHA cash-out. Your current loan does not need to be an FHA loan. A conventional loan can be replaced, though the 80% cap and mortgage insurance still apply.
An existing FHA loan with no cash needed belongs in a different lane. If you hold an FHA loan and only want a better loan, the Streamline or rate-and-term usually fits better. The 80% cap does not apply there. Rolling costs in is more workable when no cash is taken. Streamline rules on which costs can be added are tighter, so ask your loan officer how the lender handles them.
Older FHA loans have exceptions. The 2023 annual premium reduction does not apply to Streamline and simple refinances of FHA loans endorsed on or before May 31, 2009. Those borrowers should ask what applies to their loan.
Second homes and rentals are out. FHA cash-out is for owner-occupied primary residences only. Occupancy decides the leverage, and a second home or rental does not qualify for this program.
Strong equity can still be blocked. The 12-month ownership and occupancy test can stop a file even when you have plenty of equity.
Rules get updated. HUD revises the handbook from time to time. Lenders work from the version in force when your case number is assigned, so ask what applies to your file.
Is Rolling Costs In Worth It?
Rolling in is a trade. You keep cash in your pocket today and pay for it with interest over time. Whether that trade is worth it depends on how long you keep the loan.
Costs financed into the balance accrue interest for the life of the loan. The Consumer Financial Protection Bureau has pointed out that costs are often simply rolled into the total loan amount, “racking up interest for the life of the loan.” If you expect to sell the home or refinance again soon, you pay interest on those costs without much time for the new loan to repay you.
The break-even logic is simple. You want to keep the loan long enough that the benefit of the cash, or of the better loan terms, outweighs the extra interest on the financed costs. If you plan to stay for many years and the cash serves a clear purpose, rolling in can make sense. If your plans are short or uncertain, paying costs up front or taking less cash may cost less.
The stronger play for many homeowners might be a smaller cash-out. Borrowing only what you need leaves more room under the ceiling for costs. It also keeps the new balance, and your payment, lower. Borrowers who want the maximum cash and want to roll in every cost tend to run into the ceiling first.
A cash-out refinance also lengthens your payoff timeline and may raise your payment, according to the Consumer Financial Protection Bureau’s home equity guide. Federal research on cash-out borrowers, published by the same agency, found that paying off other debts is a common reason for cash-out. Paying off debt with home equity only helps if the old balances stay paid off.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Which Program Fits Your Situation?
Pick the program from your goal first, then your current loan. The right match comes from how the numbers line up on your file, which is why a broker shopping several wholesale lenders helps.
| Your situation | Likely fit |
|---|---|
| Need cash, own a primary residence, 12+ months owned | FHA cash-out |
| Hold an FHA loan, want a better loan, no cash | FHA Streamline |
| Want a different loan with an appraisal, no cash | FHA rate-and-term |
| Need more cash than 80% allows | Compare conventional or another program |
| Veteran or service member with a primary home | Compare VA options |
The 80% ceiling is the pressure point. A borrower who needs cash beyond that level should look at other programs.
A higher credit score does not buy more cash-out under FHA. The ceiling is 80% regardless. Your score affects approval and how the loan is priced, not how high the box goes.
Mistakes and Myths to Avoid
“Rolling in is free because I bring no cash.” It is financed debt. It adds interest, and it uses up ceiling room.
“Zero cash to close means zero closing costs.” Those are two different numbers on the Closing Disclosure.
“Closing costs are fixed once the lender quotes them.” Some can change, within limits. The Consumer Financial Protection Bureau explains which costs can and cannot increase from your Loan Estimate to closing.
“A Streamline gets me cash.” It is built for a better loan, not for equity. Cash back is limited.
“FHA lets me borrow more than conventional.” On a cash-out, that is not how it works. Old advice about higher FHA limits predates the 2019 change.
“Mortgage insurance ends once I have 20% equity.” FHA follows its own schedule, tied to your term and LTV.
What to Ask Before You Commit
Bring these questions to your loan officer, and check each answer against your Loan Estimate.
- Are any closing costs financed into the loan? Find the line labeled “Closing Costs Financed (Paid from your Loan Amount).”
- What is the new loan amount, and how much room is left under the 80% ceiling?
- How is the upfront premium treated in the final balance?
- What happens to my payment and my debt ratios with the larger balance?
- How long does the annual mortgage insurance last on my file?
- If I borrow less, how do the balance and cash change?
- Which costs can still change before closing?
Use the Loan Estimate and Closing Disclosure sample forms from the Consumer Financial Protection Bureau to compare offers side by side. A cheaper-looking quote is only cheaper if the same costs are counted in both.
Comparing Your Options
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. A broker that shops multiple wholesale lenders can match the program to your equity, credit, and goal.
Key Terms Defined
Cash-out refinance: A new, larger mortgage that pays off your old one and gives you the difference in cash.
Adjusted value: The home’s appraised value, as FHA adjusts it, which the 80% ceiling is measured against.
Combined LTV: Your first mortgage plus any other liens, divided by the home’s value.
Upfront mortgage insurance premium: A one-time FHA charge, 1.75% of the base loan, that is usually financed into the balance.
Annual mortgage insurance premium: An ongoing FHA charge, between 0.15% and 0.75% of the balance depending on term, loan amount, and LTV.
Net tangible benefit: The requirement that a Streamline leave you measurably better off than your current loan.
Loan Estimate: The standard form that shows your loan terms and estimated closing costs before you commit.
Frequently Asked Questions
Can I roll closing costs into an FHA cash-out refinance?
Yes, in most cases, as long as the total new loan stays within the 80% ceiling. The costs are added to the balance, so they use room that could have gone to your cash. Your lender’s guidelines and your appraisal decide how much room you have.
Does rolling costs in reduce the cash I receive?
Yes, it can. Your payoff, your financed costs, and your cash all share the same 80% ceiling. If you want a fixed amount of cash and the ceiling is tight, rolled-in costs can force that amount down. If your equity is large, costs may fit with room to spare.
Do I need an existing FHA loan to get an FHA cash-out?
No. A conventional or other mortgage can be refinanced into an FHA cash-out. You still need to own and occupy the home as your primary residence for 12 months before the case number, and the 80% ceiling and mortgage insurance still apply.
Can I use a rental or second home for an FHA cash-out refinance?
No. FHA cash-out is limited to owner-occupied primary residences. Occupancy decides the leverage, and a second home or rental falls outside this program.
Is a “no-closing-cost” refinance the same as rolling costs in?
Not exactly. Rolling in adds the costs to your balance. A “no-closing-cost” refinance builds them into the loan terms or the balance in some other way. Either way, you still pay them over time, so compare the two offers on your Loan Estimate.
For your own numbers, request a scenario review with Lendmire.
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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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: Closing Disclosure explainer
2. HUD Mortgagee Letter 2023-05
3. HUD Mortgagee Letter 2019-11
4. HUD Handbook 4000.1 (Update 18)
5. CFPB Older Americans housing guide (home equity)
6. CFPB: Can My Final Mortgage Costs Increase from What Was on My Loan Estimate
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 Cash-Out Refinance for Homeowners Who Also Need a Lower Payment · Best FHA Cash-Out Refinance Program With Social Security Income Grossed Up · Can an FHA Cash-Out Refinance Pay Off a Spouse in a Divorce?
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
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.