The Quick Read: FHA has one cash-out refinance, so the “best” version is the one that matches your home, your equity, and your credit. The new loan can reach 80% of your home’s appraised value. It pays off your current mortgage, covers costs, and sends you whatever is left. You don’t need an existing FHA loan to use it, though an FHA Streamline won’t hand you meaningful cash.
Key Takeaways
- FHA cash-out tops out at 80% loan-to-value (LTV, the loan as a share of the home’s value). You keep at least 20% equity.
- You need to have owned and lived in the home for 12 months before the case number is assigned.
- The new loan replaces your old one entirely, with new mortgage insurance and new closing costs.
- Cash to you equals the new loan minus your payoff and costs. It is not 80% of your equity.
- A Streamline or a rate-and-term refinance can lower your payment or change your term. Neither is built to pay you cash.
What Is an FHA Cash-Out Refinance, Really?
It is a brand-new first mortgage, insured by the Federal Housing Administration, that pays off whatever you owe now and puts the difference in your pocket. The old loan disappears. You make one payment on the new one.
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.
Lendmire’s FHA cash-out refinance program page lays out the program summary. The short mechanics: you live in the home, you have built equity, and you want some of it back as cash. The lender orders an appraisal and sets the maximum new loan at 80% of the appraised value. Subtract the payoff and the costs. What remains is yours.
One point confuses many borrowers. The words “FHA-insured home” in the title suggest you must already have an FHA loan. You don’t. Any existing mortgage can be refinanced into an FHA cash-out loan, and so can a home with no mortgage at all. What matters is that the home is your principal residence and you meet the ownership and credit tests below.
So which program is “best”? Honestly, that is a question about your situation, not a ranking. A broker shops several wholesale lenders and matches your file to the program that fits. The sections below show you how to judge that fit yourself.
Which FHA Refinance Actually Gives You Cash?
Only the cash-out version gives you meaningful cash. The Streamline and the rate-and-term refinance exist to change your loan, not to turn equity into money. Choosing the wrong one wastes an application, so start here.
| Factor | FHA Cash-Out | FHA Streamline | FHA Rate-and-Term |
|---|---|---|---|
| Cash back | Yes, after payoff and costs | No meaningful cash | No meaningful cash |
| Appraisal | Required | Not required | Required |
| Max financing | 80% LTV | Tied to existing loan | Up to 97.75% LTV |
| Existing FHA loan needed | No | Yes | No |
| Credit review | Full | Limited | Full |
The Streamline requires a net tangible benefit, meaning the refinance has to leave you measurably better off. The premium continues from your old loan. The rate-and-term reaches 97.75% on a principal residence you have occupied for the previous twelve months.
Notice the trade. Cash-out gives up leverage (80% versus nearly 98%) in exchange for access to your equity. That is why it asks for a full appraisal and a full credit review.
How the Loan Is Underwritten, Step by Step
Underwriting an FHA cash-out follows six steps, and the first one decides whether you proceed at all. Each step is a gate. Miss one and the loan stalls or changes shape.
1. Occupancy and ownership. The home must be your principal residence. You must have owned and occupied it for 12 months before the case number is assigned. A second home or a rental does not qualify under this program. Occupancy decides the leverage, and an investment property uses entirely different financing.
2. Payment history. Lenders want a clean recent record on your current mortgage. Late payments in the past year can end the conversation. Forbearance or a loan modification adds extra steps before you can take cash out.
3. Credit. Lenders review your credit profile against the program’s guidelines, and individual lenders can set their own overlays that are stricter than the program baseline, which is why shopping matters.
4. Ratios. Lenders compare your housing payment and your total monthly debts to your gross income. The base pair is 31/43, meaning housing at 31% and total debts at 43%, with no compensating factors. Documented strengths such as reserves or a stable job history can stretch that as far as 40/50 at the top tier. In practice, the automated underwriting finding governs most files.
5. Appraisal. The 80% cap is measured against the appraised, or “adjusted,” value. A low appraisal shrinks your cash dollar for dollar. Loan size is also bounded by county loan limits, which change every year.
6. Final sizing and disclosures. The new loan has to cover your payoff, any other liens that count toward combined LTV, and costs. You receive a Loan Estimate and, before closing, a Closing Disclosure. Compare them line by line.
HUD Handbook 4000.1 is the policy source FHA lenders follow. It gets updated, so program details shift over time. Every figure here is subject to lender guidelines and a full file review.
Why 80%, and What It Means for Your Cash
The cap is 80% of value, not 80% of your equity. FHA used to allow more. HUD Mortgagee Letter 2019-11 cut the maximum LTV and combined LTV on cash-out refinances from 85% to 80% of adjusted value. HUD called the change a prudent measure to strengthen the equity position of these loans.
That is why some borrowers still quoting an older limit are surprised. If you hear “85%,” the information is outdated.
Combined LTV matters if you have a second lien. Any other loan that stays in place counts toward the 80%. So does the financed mortgage insurance premium. Ask your loan officer exactly how your file is measured.
A Worked Example (in Percentages)
Say your home appraises at 100% of a round value. The most the new loan can reach is 80%.
Your current mortgage balance is 55% of value. Subtract that from the 80% cap and you have 25% of value in play.
Now the costs come out of that 25%. The upfront mortgage insurance premium is 1.75% of the base loan. On an 80% loan, that is about 1.4% of the home’s value. Closing costs on a new first mortgage come out too. They can be paid in cash at closing or taken from the proceeds. Your Closing Disclosure shows “Total Closing Costs” separately from “Cash to Close,” and the two are not the same number.
So the cash you actually receive lands meaningfully below 25%. Zero cash due at the table does not mean zero cost. It may mean the costs came out of your proceeds.
A low appraisal changes everything. If the value comes in 5% lower than you hoped, the 80% cap drops with it. Your payoff does not. The cash shrinks, and in a thin-equity case it can disappear.
What It Costs You Over Time
A cash-out refinance often raises your payment and stretches your payoff date. The CFPB’s guide to using home equity says a cash-out refinance may extend the time to pay off the mortgage, and the monthly payment may increase because a larger loan replaces the current one. The same guide notes lenders typically want you to keep at least 10% to 20% of the home’s value as equity. FHA’s cap leaves you at 20%.
Three costs stack up:
- Mortgage insurance on the whole loan. The upfront premium is 1.75% of the base loan, usually financed. That raises your balance and counts toward the LTV test. 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, the premium lasts the full term above 90% LTV and ends after eleven years at or below it. Cash-out is capped at 80%, so the shorter schedule usually applies. HUD Mortgagee Letter 2023-05 sets the schedule, and your lender confirms your tier.
- Closing costs on a new first mortgage. Costs vary by lender and loan, and your Loan Estimate itemizes them.
- A restarted clock. A new thirty-year term resets the schedule. If you were ten years into your old loan, you are starting over.
There is also the loan you leave behind. If your current mortgage has favorable terms, replacing it gives those up. Compare that against how much cash you need.
Where the General Rule Breaks
The 80% cap and the 12-month test are the rule. Real files bend around them in a few named ways.
You own the home free and clear. Paid-off homes can still be refinanced as cash-out. People assume otherwise. HUD’s Mortgagee Letter 2020-30 allows it.
Your current loan isn’t FHA. Conventional, VA, or other loans can all be paid off with an FHA cash-out. This is the opposite of a Streamline, which needs an existing FHA loan.
You’ve owned the home less than a year. The 12-month ownership and occupancy test applies. Buy in spring, and the cash-out door opens the next spring.
You’ve had a forbearance or modification. Expect more documentation and a stretch of on-time payments before cash-out is on the table. Your lender can tell you which steps apply.
You’ve had a bankruptcy or foreclosure. HUD sets waiting periods: two years from a chapter 7 discharge and three years from a foreclosure. Those are HUD rules, not a promise from any lender, and individual lenders may add their own.
Manufactured homes. Extra restrictions can apply. Ask early, because this one depends on the property and the lender.
A second home or rental. One sentence settles it: FHA cash-out covers only your principal residence.
Which Path Fits Your Situation?
Start with what you want the money to do and what you already hold. Then match the loan.
| If you are… | Consider |
|---|---|
| Holding an FHA loan and want a lower payment | FHA Streamline |
| Owning a home with solid equity and needing cash | FHA cash-out |
| Holding a non-FHA loan with credit under conventional floors | FHA cash-out |
| Eligible for VA with a VA loan | VA cash-out (separate rules) |
| Strong on credit and wanting to keep the first mortgage | Home equity loan or HELOC |
| Unable to leave at least 20% equity | A smaller cash need, or waiting |
A few honest tradeoffs. FHA tends to fit borrowers whose credit would struggle under some conventional programs, because FHA reaches lower scores. But FHA carries mortgage insurance on the full loan. A conventional cash-out may carry different insurance terms or none, depending on your equity and score. A VA cash-out has its own structure for eligible veterans.
Home equity loans and HELOCs leave your first mortgage alone. That matters when the first loan has terms you’d hate to lose. The catch is that a second lien has its own qualifying rules. This one is a genuine toss-up for borrowers with a good first loan and decent credit. FHA cash-out usually wins when the first loan is already a problem, or when credit is the obstacle.
Across the wholesale programs Lendmire places, the choice usually turns on three things: how much equity you really have after the appraisal, how your credit looks to the lender, and how you feel about replacing your current loan.
How Borrowers Actually Use the Cash
Paying off other debt is the most common use. In its report on cash-out refinances and paydown behavior, the CFPB found that more than half of cash-out borrowers in the earlier years it studied listed paying off other bills or debts as a reason. Credit scores for those borrowers improved sharply at first, then gradually slipped, though they stayed above where they started.
That pattern should give you pause. Moving credit card balances into your mortgage lowers the monthly strain. It also turns unsecured debt into debt secured by your home. And if the cards fill back up, you have both problems.
Home improvements that raise value make a cleaner case. So does consolidating debt when you have changed the spending that created it. Otherwise, treat the cash as borrowed against your house, because it is.
Key Terms Defined
LTV (loan-to-value): the new loan as a percentage of the home’s appraised value. FHA cash-out stops at 80%.
Adjusted value: the value FHA uses to measure the cap, based on the appraisal.
Combined LTV: all loans against the home added together, measured against value.
Upfront mortgage insurance premium: a one-time charge of 1.75% of the base loan, usually financed into the balance.
Annual mortgage insurance premium: a yearly charge paid monthly. It depends on term, loan amount, and LTV.
Streamline refinance: an FHA-to-FHA refinance with no appraisal, a limited credit review, and a net tangible benefit.
Net tangible benefit: a measurable improvement from the refinance, such as a lower payment.
Seasoning: the waiting period of ownership and occupancy before you can refinance. Here it is 12 months.
Weighing 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. Lendmire’s piece Best Cash-Out Refinance Program With a $500K Home and Equity to Tap shows the same sizing logic on a conventional file. Nothing here is a commitment to lend, and every program detail is subject to lender guidelines and a full review of your file.
Frequently Asked Questions
Do I need an existing FHA loan to get an FHA cash-out refinance?
No. Conventional, VA, and other mortgages can be refinanced into an FHA cash-out loan, and so can a home with no mortgage. The Streamline is the product that requires an existing FHA loan. For cash-out, what matters is that the home is your principal residence and you pass the ownership, payment-history, and credit tests.
Can an FHA Streamline give me cash?
Not in any meaningful amount. The Streamline exists to improve your existing FHA loan, with no appraisal and a limited credit review. Cash back needs the full cash-out transaction, which means a full appraisal and a full credit review.
How much cash can I actually take out?
The new loan can reach 80% of the appraised value. From that, subtract your current payoff, any other liens that count toward combined LTV, the financed upfront premium, and closing costs. What remains is your cash. A lower appraisal shrinks it, and the limit is measured against value, not against your equity.
Does FHA mortgage insurance go away after a cash-out refinance?
No. A new FHA loan carries new mortgage insurance. The upfront premium is 1.75% of the base loan. On a thirty-year loan at or below 90% LTV, the annual premium ends after eleven years. Cash-out is capped at 80%, so that schedule usually applies, and your lender confirms your tier.
What credit score do I need?
The wholesale programs Lendmire places FHA loans with start at a 580 decision score, subject to lender guidelines. Some lenders set higher floors, and your ratios and compensating factors matter alongside the score. The base ratio pair is 31/43, with documented factors reaching 40/50 at the top tier.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. 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. HUD Mortgagee Letter 2019-11
2. CFPB: Using Home Equity guide
3. HUD Mortgagee Letter 2023-05
4. HUD Mortgagee Letter 2020-30
5. CFPB: Cash-Out Refinances and Paydown Behavior
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 Cash-Out Refinance Program to Remove Mortgage Insurance From an FHA Loan · How an FHA Lender Sizes a Cash-Out Refinance Against a Streamline · Best FHA Cash-Out Refinance Program With FHA Cash Reserve Requirements
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- 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.