The Quick Read: An FHA cash-out refinance can fund the next house, but only if you meet the rules on the home you live in now. You must have owned it and lived in it for 12 months before the case number is assigned. The new loan can go up to 80% of the home’s value. Whatever is left after your old mortgage and costs is yours to use, and a down payment is a common use. Then the next house gets underwritten as its own loan, and the cash does not qualify you for it.
Key Takeaways
- The refinance replaces your whole first mortgage. It is not a second loan stacked on top.
- Your current home must be your principal residence, owned and occupied for 12 months before the case number.
- The new loan tops out at 80% of the home’s value, so at least 20% equity stays in the house.
- Cash from the refinance is a source of funds. The next purchase has its own approval.
- FHA will not finance a second home or a rental. That limits what the new house can be.
What an FHA Cash-Out Refinance Is
An FHA cash-out refinance is a new, larger FHA first mortgage. It pays off your existing mortgage and any liens. You receive the difference in cash.
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.
You are not borrowing against a line of credit. You are swapping the loan you have for a new one. The new loan has its own term, its own closing costs and its own mortgage insurance. Mortgage insurance is the premium FHA borrowers pay to protect the lender if the loan goes bad.
Lendmire’s FHA cash-out refinance program page covers the basic product. This article focuses on one use: pulling equity out of the home you live in to buy a different house.
Lendmire is a mortgage broker. It arranges FHA loans through wholesale lenders in the 16 states where it does consumer lending. The lender reviews your file and makes the final call. Everything here is subject to lender guidelines and a full file review, and none of it is a commitment to lend.
The Requirements Checklist
Two properties are involved, and each has its own rules. The table sorts them out.
| Requirement | What it means for you | Applies to |
|---|---|---|
| Principal residence | The home must be where you live | Home you refinance |
| 12-month ownership and occupancy | Owned and lived in for 12 months before the case number | Home you refinance |
| 80% maximum LTV | New loan is capped at 80% of value | Home you refinance |
| Payment history | Lenders review how you paid the current loan | Home you refinance |
| Credit score | The wholesale programs Lendmire works with start at 580 | Both loans |
| Debt ratios | Base 31/43, up to 40/50 with strong factors | Both loans |
| Occupancy intent | You plan to live in the next house | Home you buy |
LTV means loan-to-value. It is the loan balance divided by the home’s value. At 80%, a new loan can be no more than four-fifths of what the home is worth.
A case number is the FHA tracking number assigned to your file when the lender orders the appraisal. The 12-month clock runs back from that date, not from the day you first apply. Make sure you count correctly before you start.
Where the 80% Comes From (and Why You May See 85%)
The 80% cap is a federal rule. HUD Mortgagee Letter 2019-11 set the maximum loan-to-value and combined loan-to-value for FHA cash-out refinances at 80% of the home’s adjusted value. It applies to case numbers assigned on or after September 1, 2019. Combined loan-to-value counts any second lien along with the first mortgage.
You will still see 85% online. HUD’s own announcement described the cut from 85% to 80%, and some older pages never updated. Treat 85% as stale.
The practical result is simple. At least 20% of the home’s value stays as your equity after closing. The cap covers the entire new loan, not just the cash you take out.
The FHA rate-and-term refinance is a different product. It reaches 97.75% on a principal residence you have occupied for the previous twelve months. But it gives you no cash. If you need money for the next house, 80% is your ceiling.
How the Loan Is Underwritten, Step by Step
Here is the sequence from start to finish.
1. Eligibility screen. Confirm the home is your principal residence and that you have owned and lived in it for 12 months before the case number. HUD Handbook 4000.1 is the controlling FHA policy document, and lenders work from it.
2. Appraisal. The lender orders one and the appraised value is run through FHA’s adjusted value rules. The 80% cap applies to that adjusted figure.
3. Loan sizing. The new loan must pay off your current mortgage and any liens, plus costs. County loan limits apply, and they change every year. They set a ceiling on the loan amount in your area.
4. Credit, income and debt ratios. The lender reviews your credit and your payment history on the current loan. It checks that your income supports the new payment.
5. Closing. The old loan is paid off. You receive the remaining cash.
Credit first. Across the wholesale programs Lendmire works with, FHA purchase loans start at a 580 decision score. HUD’s own rules reach lower, but the network does not. Some lenders set a higher floor on cash-out refinances, so expect your score to matter more here than on a purchase.
Debt ratios work like this. The first number is your housing payment as a share of gross income. The second is all monthly debts as a share of income. The base pair is 31/43. With documented compensating factors, such as strong reserves or a long job history, ratios can stretch to 40/50 at the top tier. An automated underwriting finding decides most files.
What the Mortgage Insurance Does to the Loan
FHA mortgage insurance has two parts. The upfront premium is 1.75% of the base loan, and it is usually financed into the balance. The annual premium runs between 0.15% and 0.75% of the balance. The exact figure depends on the loan’s term, its amount and its LTV.
On a thirty-year loan above 90% LTV, the annual premium lasts for the full term. At or below 90% LTV, it ends after eleven years. Because the cash-out cap is 80%, your new loan will usually fall at or below 90%.
These are program mechanics, not a price quote. Your actual costs appear on the Loan Estimate your lender provides.
Can the Cash Buy Another House?
Yes, it can fund part of the purchase. Cash-out proceeds are not limited to specific uses. Many borrowers pay down debt or make repairs. Others use the money for a down payment.
But the cash does not make you eligible for the next loan. The new purchase gets underwritten on its own. The lender looks at your credit, income, debts and reserves again. Having cash in the bank helps, but it is not approval.
Here is what the next lender will count:
- Both housing payments. Your refinanced mortgage payment and the new mortgage payment both go into your debt ratio. The old payment drops out only when it can be excluded under the program’s rules.
- A bigger payment on the old home. A cash-out loan replaces your balance with a larger one. The CFPB notes that a cash-out refinance may extend the time it takes to pay off your mortgage, and the monthly payment may go up.
- Where the money came from. Funds from a refinance are documented as proceeds, not as savings. Expect the lender to ask for the closing paperwork.
Which Loan Can You Use on the New House?
This is where the plan most often breaks. FHA purchase loans are for owner-occupied principal residences, one to four units. FHA does not finance a vacation home, a second home or a rental. If the new house is not going to be where you live, occupancy decides your leverage and your loan type.
The table shows how the new house is treated.
| New house will be… | FHA purchase loan? | What decides it |
|---|---|---|
| Your new primary home | Possible, with an exception | One-residence rule |
| A second or vacation home | No | FHA is for principal residences |
| A rental you won’t live in | No | FHA is for principal residences |
FHA’s one-residence rule is the catch. HUD’s FHA Answer Center explains that FHA will not insure more than one principal residence per borrower, with named exceptions. Those include relocating for work to a home more than 100 miles away, and an increase in family size. Vacating a jointly owned home where a co-borrower stays is another.
Note the wording: more than 100 miles, not 100. Family-size exceptions can carry an equity condition on the current home. Ask your lender to check the current handbook before you rely on it.
If you are moving across the country for a job and keeping the old house, the exception can work. If you are just upsizing across town and keeping the old home, usually it does not.
What Happens to Your Current Home Afterward
The refinance locks in your occupancy. You told the lender this is your principal residence. The standard FHA occupancy rule expects you to live there and intend to stay.
If you move out and rent the home afterward, you generally cannot take another cash-out loan on it until you have lived there again for 12 months. Rental income from a vacated home counts toward qualifying only in narrow cases, such as a qualifying relocation. Don’t plan on it counting.
Claiming you live in a home when you don’t is occupancy fraud. It is a federal offense. Be honest with the lender about where you will live and when.
Inherited homes carry their own wrinkle. If you rent an inherited property, you generally must live in it for 12 months before cash-out. Ask your loan officer how the rules treat your situation.
A Worked Example
Say your home appraises at a value we will call 100%. Your current mortgage balance is 55% of that value.
The maximum new loan is 80%. That leaves a gap of 25% of the home’s value before costs. Closing costs and the financed upfront premium come out of that gap. What remains is your cash.
Now apply it to the next house. Say you are buying a new primary home under one of the exceptions above. A purchase on FHA needs a 3.5% minimum investment at a 580 decision score or higher, with a maximum of 96.5% financing. Your refinance cash can cover that investment, plus closing costs and reserves, if the amount fits.
Next, the part people skip. The lender will count your refinanced payment and the new mortgage payment together. With a base ratio pair of 31/43, two payments can crowd your debt ratio fast. Strong compensating factors can push the limits to 40/50, but the automated finding governs most files.
These percentages are illustrative. Your numbers depend on your appraisal, your payoff and your costs.
Refinance First or Buy First?
Refinance first is the cleaner path. Your cash is in the bank before you make an offer. The lender sees real funds, and you know your payment before you commit.
The cost is timing risk. You are paying a new, larger mortgage while you shop. If the house hunt drags on, you carry that payment with no second home.
Buying first means you need another source for the down payment. A bridge or equity line may fill the gap. Those carry their own terms and are not covered here. A cash-out refinance after the purchase can also run into occupancy questions if the new house becomes your principal residence.
Talk to your loan officer about the order before you sign anything. Sequence changes which lender reviews what and when.
Key Terms Defined
Cash-out refinance: A new, larger mortgage that pays off your old loan and gives you the difference in cash.
Case number: The FHA tracking number assigned to your file when the appraisal is ordered. The 12-month occupancy clock runs back from it.
Adjusted value: The home value FHA uses after its own rules are applied to the appraisal. The 80% cap is measured against it.
Combined loan-to-value (CLTV): Your first mortgage plus any other liens, divided by the home’s value.
Compensating factors: Strengths in your file, such as reserves or a stable job history, that let a lender allow higher debt ratios.
Principal residence: The home you live in as your main address.
Pros, Cons and Who This Fits
This fits you if you are moving to a new primary home under an FHA exception, have lived in your current home for at least 12 months, and have meaningful equity above the 80% cap.
It does not fit you if you want to keep the old home as a rental and buy a second house you will not live in. FHA is not the loan for that plan. It also fits poorly if your debt ratio is already stretched, since two payments will be counted.
The upside is access to cash without selling the home. The downside is a new mortgage at your new terms, new closing costs, a larger balance and mortgage insurance. CFPB research found that cash-out borrowers saw an initial credit score improvement followed by a gradual worsening, so weigh the effect on your credit too, according to the CFPB.
Questions to Ask Your Loan Officer
- How does my 12-month clock count from the case number?
- What decision score does the lender need on a cash-out?
- Will both payments count in my ratio, and can the old one be excluded?
- Does my plan fit an FHA one-residence exception?
- What happens to the new purchase if my appraisal comes in low?
Bring your recent pay records, two years of tax returns if you are self-employed, current mortgage statements and bank statements. Each lender sets its own list.
Frequently Asked Questions
What credit score do I need for an FHA cash-out refinance?
The wholesale programs Lendmire places FHA loans with start at a 580 decision score. HUD’s guidelines reach lower, but the network does not. Some lenders set a higher floor on cash-out refinances. Your score, ratios and file strength all feed the final decision, subject to lender guidelines.
Can I use an FHA cash-out refinance on a second home or rental?
No. The standard FHA cash-out refinance is for a principal residence you own and live in. FHA does not finance second homes or rentals as purchases either. Occupancy decides which loan you can use.
Is there any limit on how I spend the cash?
No. Cash-out proceeds are not restricted to a particular use. But using the money for a down payment does not mean you qualify for the next mortgage. That loan is reviewed separately, with its own credit, income and debt checks.
Can I buy another house with FHA while keeping my current one?
Usually not. FHA will not insure more than one principal residence per borrower. Named exceptions exist, such as relocating more than 100 miles for work or an increase in family size. A lender will check your facts against current HUD policy.
How long do I have to live in my home before I can do a cash-out?
You must have owned it and lived in it as your principal residence for 12 months before the case number is assigned. A lender will also review your payment history on the current loan.
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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References
1. HUD Mortgagee Letter 2019-11
2. HUD press release PR 19-114 (archive)
4. CFPB: Using your home equity guide
6. CFPB
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 to Tap Equity on an FHA-Insured Home · How to Choose an FHA Cash-Out or Streamline Refinance With Thin Credit · Best FHA Cash-Out Refinance Program When Your Current Mortgage Is an FHA Loan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.