The Quick Read: An FHA cash-out refinance replaces your current mortgage with a larger one and pays you the difference, but only on a home you own and live in as your primary residence. Two limits cap the amount: 80% of the home’s adjusted value, and the FHA loan limit for your county. You must have owned and occupied the home for 12 months before the case number is assigned, and your payment history over that period has to be clean. All of this is subject to lender guidelines and full file review.
What Is an FHA Cash-Out Refinance?
An FHA cash-out refinance is a new FHA-insured mortgage that pays off your existing loan and puts the leftover equity in your hands as cash. Nothing is added on top of your old mortgage. The old loan is gone, and the entire balance moves onto new terms.
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.
Your current loan does not have to be an FHA loan. A conventional loan, a VA loan, or no mortgage at all can be refinanced this way. That separates it from the FHA Streamline, which requires an existing FHA loan and pays out nothing. Some web pages blur the two, so keep them apart.
A home owned free and clear still counts as a cash-out transaction. Paying off the house does not turn the new loan into a simple rate-and-term refinance.
For the program overview, see Lendmire’s FHA cash-out refinance program page. Lendmire is a mortgage broker, so it arranges these loans through wholesale lenders rather than lending directly.
Requirements at a Glance
| Requirement | What it means | How it’s checked |
|---|---|---|
| Occupancy | Primary residence only | Utility bills or employment records |
| Ownership and occupancy | 12 months before case number | Lookback from case number date |
| Payment history | Every mortgage paid within the month due | Mortgage statements, 12-month review |
| Maximum leverage | 80% LTV on adjusted value | Appraisal |
| Loan size | Cannot exceed county limit | County lookup by unit count |
| Credit | Decision score of 580 or higher | Credit report and automated findings |
| Ratios | 31/43 base, up to 40/50 with factors | Underwriting review |
Treat these as the working envelope. Across the wholesale programs Lendmire places FHA loans with, the credit floor starts at 580. HUD has a lower tier for scores of 500 to 579, but that tier is outside what these lenders reach.
How the Loan Is Underwritten, Step by Step
Underwriting follows a fixed order, and each step can stop the file.
1. Case number. The lender orders an FHA case number. Both the 12-month ownership lookback and the payment-history lookback are measured from this date, not from your application or closing.
2. Occupancy proof. The lender reviews employment documentation or utility bills to show you lived there as your principal residence for the full 12 months.
3. Payment history. Every mortgage on the home must show payments made within the month due, for the previous 12 months or since you took the loan, whichever is shorter. One late payment in that window can end the file.
4. Appraisal. The 80% test applies to adjusted value, which comes from the appraised value under HUD’s formula. The appraisal therefore decides your maximum loan.
5. Credit and ratios. The lender reviews your score and your housing and total debt ratios against program standards.
6. Maximum loan. The final figure is the lower of 80% of adjusted value and the county loan limit.
7. Closing and cancellation. You sign, then a right-to-cancel window runs before funds are released.
That order matters in practice. Borrowers often start with the cash they want and work backward. The loan runs the other way: the appraisal and the lookbacks set the ceiling, and your cash is whatever remains after the old loan, costs, and insurance.
How the Limits Work: 80% Versus the County Cap
Two ceilings apply at once, and the lower one governs.
The first is leverage. HUD Mortgagee Letter 2019-11 set the maximum loan-to-value and combined loan-to-value on FHA cash-out refinances at 80%, for case numbers assigned on or after September 1, 2019. Any second lien counts toward that 80%. Put plainly, at least 20% of your home’s value stays as equity.
The second is the county loan limit. FHA limits are set by county and unit count, and they change every year. County loan limits apply to every FHA file, so look up your own county through HUD’s mortgage limit tools instead of relying on a number you saw online.
| Situation | Which limit governs |
|---|---|
| Moderate home value in a typical county | The 80% leverage cap, usually |
| High-value home in a lower-limit county | The county loan limit |
| Home in a high-cost county | Usually the 80% cap, because the county limit is higher |
The shape of that table is the point. In a lower-cost county, the 80% cap usually binds first. In a county where homes are expensive but the FHA limit sits well below the 80% number, the county cap can bind instead. Many borrowers with larger homes find out at that point that FHA cannot reach their equity, and a jumbo or conventional route may fit better.
A Short History of the Cap
The cap has moved before. HUD’s press release on cash-out risk notes that FHA lowered the limit from 95% to 85% in 2009, and the 2019 letter then took it to 80%. HUD’s stated reason was a sharp climb in cash-out endorsements and a wish for a stronger equity cushion if a borrower defaults.
This history explains a common source of bad information. Older HUD reference pages and some lender articles still show 85%. That figure is out of date. If you see it, move on.
Walking Through the Math Without Dollars
You do not need exact figures to see how the pieces fit. Picture a home appraised at a certain value.
- Start with 80% of the adjusted value. That is the most the new loan can be.
- Check that number against the county loan limit. If the county limit is lower, it replaces the 80% figure.
- Subtract your existing mortgage payoff and any second lien that must be paid or counted.
- Subtract closing costs that you choose to roll into the loan rather than pay out of pocket.
- Remember the upfront mortgage insurance premium, which is 1.75% of the base loan and is typically financed into the balance.
- What remains is your cash.
Two things shrink the check that borrowers rarely expect. The first is the financed upfront premium, since it enlarges the loan without enlarging your cash. The second is a second lien. If you have a home equity line, it counts toward the 80% whether or not you want it to.
A borrower whose current balance is already near 80% of value will see very little cash. That is a legitimate result, not a failure of the file.
Occupancy and Ownership: Where the Rule Bends
The 12-month test is the one that trips up the most files. The home must have been owned and occupied as your principal residence for the 12 months before case number assignment. Owning it for a year is not enough on its own, and living in it for a year without owning it is not enough either.
Several situations come up repeatedly:
- Recently purchased home. Generally not eligible for a standard cash-out, because the ownership and occupancy test is not met. A rate-and-term refinance may be the better fit, since the FHA rate-and-term with an appraisal reaches 97.75% on a principal residence occupied for the previous twelve months.
- Inherited home. The handbook has an exception to the 12-month rule for inherited property. If you rented the home out after inheriting it, though, you may need to occupy it for 12 months first. Confirm the details with your lender, because this area is easy to misread.
- Second home or rental property. Standard FHA cash-out is limited to owner-occupied principal residences. Occupancy decides leverage here, and a non-owner-occupied property falls outside this program.
- Co-borrowers. FHA allows a non-occupant co-borrower on purchase loans, but the 12-month occupancy history on a cash-out is a separate test. Ask the lender how it treats the borrower who actually lived there.
- Modification or forbearance. If payments in the prior 12 months were made under a modification or forbearance plan, the lender needs extra documentation.
- Hawaiian Home Lands. HUD’s 80% reduction does not apply to these mortgages. Most borrowers will never encounter this one.
One more caution. HUD updates its handbook periodically, and these rules have been revised before. Treat any figure here as a snapshot of the program envelope, and let your loan officer confirm current handbook language.
Credit, Ratios, and Payment History
On the credit side, the wholesale programs Lendmire places FHA loans with start at a decision score of 580. Some lenders set a higher floor than FHA does, a practice called an overlay, so one lender may decline a file that another would review. That is a main reason shopping through a broker can matter.
Ratios work as a pair. The base standard is 31/43, meaning housing costs up to 31% of income and total debts up to 43%. With documented compensating factors, such as reserves or a strong payment record, the top tier reaches 40/50. The automated underwriting finding governs most files, so the numbers a lender quotes before running the file are an estimate.
Payment history deserves its own mention because it is binary. The mortgage payments must be within the month due across the lookback. Borrowers often assume one 30-day slip a few months ago will be forgiven. On a cash-out, it can sink the loan. If you have a recent late payment, a different loan type or a wait may serve you better.
Credit events carry HUD waiting periods: two years from a chapter 7 discharge and three years from a foreclosure. These are HUD’s rules, not a promise of eligibility after the period ends.
Mortgage Insurance and What It Does to Your Cash
FHA charges two kinds of mortgage insurance. The upfront premium is 1.75% of the base loan, and per HUD Mortgagee Letter 2023-05 it applies to most FHA mortgages, with Streamline and Hawaiian Home Lands exceptions. It is usually financed into the balance.
The annual premium runs between 0.15% and 0.75% of the balance, depending on term, loan amount, and LTV. Because a cash-out tops out at 80% LTV, the annual premium on a thirty-year loan typically ends after eleven years. Above 90% LTV, it lasts the full term, but that threshold does not apply to a cash-out.
Describe this as mechanics, not a price. The premium lowers your net cash, raises your balance, and shapes your monthly obligation. When you review the Loan Estimate, find the mortgage insurance lines and ask how each is calculated.
Practitioner Note: Where Files Go Sideways
Across the FHA cash-out files that come through the wholesale network, the same few problems recur. The appraisal comes in lower than the borrower expected, and the 80% test shrinks the check. A second lien, forgotten in the early math, eats a big share of the available equity. A borrower who bought just under a year earlier discovers the lookback only after applying. And a single late payment, often from a billing mix-up, surfaces during the payment review.
The fix is simple but unglamorous. Before applying, pull every mortgage statement for the last 12 months, confirm every payment landed in the month due, and total every lien on the property. That prep catches most surprises before a case number is ever pulled.
FHA Cash-Out Versus Conventional Cash-Out
Both products let you borrow against equity, and both replace your existing loan. They differ on who each one fits.
| Factor | FHA cash-out | Conventional cash-out |
|---|---|---|
| Property use | Primary residence only | Varies by program |
| Ownership history | 12 months owned and occupied | Differs by lender |
| Maximum leverage | 80% LTV | Varies by program |
| Credit floor | 580 decision score on these wholesale programs | Often set higher |
| Mortgage insurance | Upfront plus annual premium | Depends on LTV and program |
If your credit score sits in the lower range, FHA often reaches a borrower that conventional guidelines pass over. If your credit is strong and your equity is substantial, conventional may carry lower insurance costs. The flip point is usually credit strength and how long you plan to keep the loan.
Closing, Right to Cancel, and What Cash-Out Really Costs
A cash-out refinance on your primary home carries a right to cancel. The CFPB says refinances are non-purchase-money mortgages that give you three business days to cancel, counting Saturdays but not Sundays or legal public holidays. The right can extend up to three years only if the lender fails to give required disclosures. And if you refinance and then cancel, you still owe the original loan.
That is why proceeds are generally not paid out until the window closes. It is a protection, not a delay tactic.
Beyond the mechanics, consider the cost to your finances. A cash-out replaces a loan with a larger one, which can extend your payoff timeline and raise your monthly obligation. Consolidating debt only helps if the spending that created it stops.
Self-Check: Do You Likely Fit?
Run through these questions before starting an application.
- Do you own the home and live in it as your primary residence?
- Have you owned and lived in it for at least 12 months?
- Is every mortgage payment from the past 12 months within the month due?
- Does the combined balance of all liens fall comfortably under 80% of the home’s likely value?
- Is your credit score at or above 580?
- Do your debts fit within the ratio range for your profile?
- Does your county loan limit leave room above your target loan size?
If you answer no to occupancy or payment history, those are hard stops. If you answer no to leverage, you may wait, pay down a lien, or consider another structure. If the answer is no on credit, rebuilding for a few months can change the picture. Lendmire’s no-cash-out refinance guide covers the lower-leverage route when cash is not the goal.
Key Terms Defined
Adjusted value: The home value HUD uses to apply its leverage test, drawn from the appraisal under HUD’s formula.
Combined loan-to-value (CLTV): Your first mortgage plus any second liens, measured against the home’s value.
Case number: The FHA identifier assigned to your file, which starts the clock on the ownership and payment lookbacks.
Upfront mortgage insurance premium: A one-time FHA insurance charge of 1.75% of the base loan, usually financed.
Right of rescission: The three-business-day window to cancel certain refinances on your primary home.
Overlay: A lender’s own rule that is stricter than the FHA minimum.
Frequently Asked Questions
Can I do an FHA cash-out refinance if my current loan is not FHA?
Yes. The existing mortgage can be conventional, VA, or any other type, or the home can be owned free and clear. You still must meet the same ownership, occupancy, and payment-history tests. This is the main difference from an FHA Streamline, which requires an existing FHA loan.
How much can I borrow?
The maximum is the lower of 80% of adjusted value and the FHA county loan limit for your area and unit count. From that, your payoff, any second lien, and financed costs come out, and the rest is your cash. Final amounts depend on the appraisal and full file review.
Does a home I inherited have to meet the 12-month rule?
The handbook includes an exception for inherited property, but it can change if you rented the home after inheriting it. Have your lender confirm how the rule applies to your situation before you rely on the exception.
Why was my friend told 85%?
That figure was the cap before HUD lowered it to 80% for case numbers assigned on or after September 1, 2019. Some older pages still show 85%. Your friend may also have been looking at a rate-and-term refinance, which is a separate product with a higher leverage ceiling than cash-out.
What if I bought my home less than a year ago?
A standard FHA cash-out is generally off the table, because the ownership and occupancy test is not met. A rate-and-term refinance or waiting out the 12 months are the usual paths. Your lender can map the timeline from your purchase date.
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 borrowers whose home value pushes past FHA county limits, Lendmire’s overview of jumbo cash-out refinance requirements shows where that path begins.
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 cash-out risk
3. HUD Mortgagee Letter 2023-05
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 Requirements for a Roof or Storm Damage · Can You Get an FHA Cash-Out Refinance? · FHA Cash-Out Refinance Requirements for a Private Note
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.