The Quick Read: An FHA cash-out refinance lets you borrow up to 80% of your home’s adjusted value, so at least 20% of the value stays in the house. That ceiling covers everything the new loan pays off, not just the cash you receive. Your payoff, any second lien, and financed costs all come out of the 80% before a dollar reaches you.
What Is an FHA Cash-Out Refinance?
An FHA cash-out refinance replaces your current mortgage with a new, larger FHA-insured loan and hands you the difference. You do not need an FHA loan today. Any mortgage can be refinanced into one, and a home owned free and clear qualifies too.
FHA cash-out estimate
Seeded with an example value, a balance to match, and a round cash request; change any field.
Editable benchmark: 7.18% as of November 5, 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.
The program is for your primary residence only. Across the wholesale lenders Lendmire works with, the standard cash-out reaches 80% LTV on a home you have owned and lived in for the 12 months before the FHA case number is assigned. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
That 80% is the whole story of “how much equity can I take.” The rest is arithmetic.
Key Terms Defined
Adjusted Value: The appraised value after HUD’s adjustments, and the number the 80% test runs against.
LTV (loan-to-value): The new loan divided by the home’s value.
CLTV (combined loan-to-value): All loans on the home, first and second liens together, divided by value.
Base loan amount: The loan before the financed upfront mortgage insurance premium is added.
Case number: The FHA identifier assigned to your file, which starts the 12-month ownership and occupancy lookback.
Where Did the 80% Cap Come From?
HUD lowered the cap in 2019. HUD Mortgagee Letter 2019-11 cut the maximum LTV and CLTV on cash-out refinances from 85% to 80% of Adjusted Value for case numbers assigned on or after September 1, 2019. The same letter notes FHA had earlier moved the cap from 95% to 85%.
HUD’s reason was risk. In its archived announcement, the agency said cash-out loans had grown to 64% of FHA-insured refinances, and it made the cut to reduce that exposure.
Old numbers still circulate online. If you read that FHA allows 85% or 95%, that page is out of date.
How Is Your Maximum Cash Calculated?
You find the most you can take by working backward from the cap. Here is the sequence, step by step.
1. Start with Adjusted Value. The appraisal sets it. Your purchase price and any online estimate do not count.
2. Take 80% of it. That is the largest loan, first and second liens combined, the program allows.
3. Check the county limit. FHA also sets a loan limit by county, and those limits change every year.
4. Subtract what you owe. Your current mortgage payoff comes out first, plus any second lien or HELOC that must be paid off.
5. Subtract costs paid from proceeds. Closing costs and the appraisal come out of what is left, or get financed into the loan.
6. What remains is your cash.
Run it with round, made-up percentages. Say a home appraises at 100 units of value and you owe 50 of them. The cap is 80, so the most you could borrow is 80. Subtract your 50 payoff and you are left with 30. Closing costs and fees then take a few more points, which leaves cash of roughly 25 to 28 units. That is about a quarter of the home’s value, not the 50% you might call your “equity.”
That gap between equity and cash is the point most borrowers miss.
Why Is Your Cash Less Than Your Equity?
Equity is value minus what you owe. Cash is the cap minus what you owe minus costs. The cap itself withholds 20% of value, so you can never reach all of your equity.
The CFPB’s guide on using home equity says lenders typically want you to keep 10% to 20% equity on cash-out loans, home equity loans, and HELOCs. FHA sits at the top of that range.
Two more things shrink the check:
- The upfront premium. FHA charges an upfront mortgage insurance premium of 1.75% of the base loan, and borrowers usually finance it. It is a program fact, not a fee Lendmire sets.
- Closing costs. These are subtracted from proceeds or added to the balance, and both routes reduce net cash.
Which Limit Binds: the 80% Test or the County Limit?
The 80% test decides for most homes, and the county loan limit decides on expensive ones. Both are ceilings, and the lower one wins.
| Situation | Which ceiling decides | What it means for you |
|---|---|---|
| Typical home, moderate price | 80% of Adjusted Value | Cash depends on value and payoff |
| High-value home in a high-cost county | County FHA limit | Cash stops early, even with large equity |
| Low appraisal | 80% test, now smaller | Every lost appraisal dollar cuts the cap |
HUD sets county limits between a national floor and a ceiling, based on local median prices. If your home is worth far more than the median where you live, check your county’s limit before you count on a big check. Lendmire’s team can pull the current figure for your county.
What Are the Basic Requirements?
Requirements come in two kinds: the program’s, and the lender’s file review. The program sets the baseline rules, and the lender’s file review then applies its own guidelines on top of them. The list below covers the program’s requirements, all of which are subject to lender guidelines and a full file review.
- Owner-occupied principal residence. Second homes and rentals do not qualify for standard cash-out. Occupancy decides the leverage.
- 12 months of ownership and occupancy before the case number, by at least one borrower.
- A clean recent payment history on the mortgage you are replacing. Lenders review it closely, and a recent late payment can delay or block cash-out.
- Credit and income. Across the wholesale programs Lendmire places FHA loans with, the credit floor starts at a 580 decision score. Ratios start at 31/43 (housing to total) with no compensating factors, and documented compensating factors can reach 40/50 at the top tier. The automated finding carries heavy weight in how a file is judged, though the lender’s full review still applies.
- Credit history events. HUD sets waiting periods of two years from a Chapter 7 discharge and three years from a foreclosure. Those are HUD’s rules, not a promise from any lender.
Where Does the General Rule Break?
Several situations bend the standard path.
You bought less than 12 months ago. Standard cash-out is off the table. A rate-and-term refinance is a different product with its own limits. It reaches 97.75% on a principal residence occupied for the previous 12 months, but it pays you no cash.
You inherited the home. An heir who lives in the house is generally not held to the usual 12-month wait. If the heir rents it out after inheriting, the 12-month occupancy clock applies. This comes from HUD’s handbook wording, so confirm it on your file.
You own it free and clear. You qualify, and the same 80% cap applies. The “cash-out” is simply a new loan where none existed.
You want an FHA Streamline. That product refinances an existing FHA loan with no appraisal, a limited credit review, and a net tangible benefit. It pays no cash to the borrower, so it is not a cash-out loan.
Your home is worth a lot. The county loan limit may bind before the 80% test does.
Hawaiian Home Lands. The 2019 HUD change may not apply to Section 247 loans, so these can follow different rules. Anyone in that situation should ask the lender directly.
How Does It Compare With Other Ways to Tap Equity?
| Option | Equity you can reach | What changes |
|---|---|---|
| FHA cash-out | Up to 80% LTV | Whole mortgage replaced; mortgage insurance applies |
| FHA rate-and-term | Up to 97.75%, no cash | Lower balance or new term, no proceeds |
| HELOC or home equity loan | Set by the lender | Your first mortgage stays in place |
| Conventional cash-out | Set by the lender and program | Different insurance and credit rules |
A HELOC leaves your current mortgage alone, which matters if its terms are better than today’s. A cash-out refinance gives up the old loan’s rate and term entirely.
What Does Mortgage Insurance Do to the Math?
It adds a cost and a longer tail. The upfront premium is 1.75% of the base loan. The annual premium depends on term, loan amount, and LTV, and it runs between 0.15% and 0.75% of the balance. HUD’s Mortgagee Letter 2023-05 lowered annual premiums, and readers should check HUD’s current schedule.
Duration matters for cash-out borrowers. On a 30-year loan at or below 90% LTV, the annual premium ends after 11 years. An 80% cash-out sits in that band. Above 90% LTV, it lasts the whole term. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
What Are the Downsides?
Cash-out is a real trade, and these are the costs to weigh.
- A bigger loan. The payment can rise because the balance is larger, and payoff may take longer.
- Less equity. At least 20% stays locked in the home, and your cushion against a price dip shrinks.
- Closing costs and insurance reduce net cash.
- Debt can creep back. CFPB research on borrowers from 2014 to 2021 found many used proceeds to pay down credit card and auto debt. Credit scores rose at first and then gradually slipped, though they stayed above pre-refinance levels. Card balances trended back toward earlier levels within a year.
If the cash goes to debt payoff, the lasting fix is a budget that stops the balances from returning. If it goes to a repair that raises the home’s value, the math is easier to justify.
What Does the Decision Look Like in Practice?
Work it in this order:
1. Get a realistic value estimate and subtract your payoff. The 80% cap leaves you roughly the difference, before costs.
2. Ask what the cash is for, and whether it is worth giving up your current mortgage’s terms.
3. Compare a HELOC or a conventional cash-out if your credit is strong.
4. Check the county loan limit if your home is high-value.
5. Make sure you meet the 12-month ownership and occupancy test and have a clean recent payment history.
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire, a mortgage broker arranging FHA loans through wholesale lenders, can help you compare the programs and the equity each one reaches. Every figure here is subject to lender guidelines and full file review, and nothing is a commitment to lend.
Frequently Asked Questions
What is the most equity I can take out with an FHA cash-out refinance?
Up to 80% of your home’s adjusted value, counting every loan on the property. After you subtract your payoff and costs, the cash in hand is far less than 80% of value. A HELOC or home equity loan taken separately, with your first mortgage left in place, is a different product, set by that lender and not by the FHA cap.
Does my purchase price or an online estimate set the cap?
Neither one does. The appraisal, after HUD’s adjustments, sets Adjusted Value, and the 80% test runs against that number. A lower appraisal shrinks the loan ceiling and your available cash with it.
Can I do an FHA cash-out on a second home or rental?
No. Standard FHA cash-out is for owner-occupied principal residences only. Occupancy decides the leverage.
Does a higher credit score let me borrow more?
No. The cap is 80% at any score. Credit affects whether you are approved and how the loan is priced. Across the wholesale programs Lendmire works with, FHA files start at a 580 decision score.
I inherited my home. Do I still wait 12 months?
If you live in it, generally not. If you rent it out after inheriting, you must occupy it as a principal residence for 12 months before a cash-out. Confirm the details against your file with a loan officer.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. 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. HUD archived announcement on cash-out risk
3. CFPB guide on using home equity
4. HUD 2026 FHA loan limits announcement
5. 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: How to Get an FHA Cash-Out When Conventional Costs Too Much · How Lenders Underwrite an FHA Cash-Out Refinance Versus Conventional Cash-Out Limits · How to Use the Inheritance Exception on an FHA Cash-Out
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
Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.