The Quick Read: A second lien counts in full toward the FHA cash-out cap. It does not add borrowing room. The cap is 80% of the home’s appraised value, and it covers the new FHA first mortgage plus every other lien that stays on the condo. A condo adds a second test, which is whether the building or unit is FHA-eligible at all.
What Is the “Cap,” and Is There a Special One for Condos?
There is no special condo cap. The limit is the same for every FHA cash-out: 80% of adjusted value, applied to combined debt. HUD Mortgagee Letter 2019-11 set that figure for both the loan-to-value ratio (LTV) and the combined loan-to-value ratio (CLTV). It applies to case numbers assigned on or after September 1, 2019.
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.
Many online pages still repeat the older, higher cash-out limit. Skip them. The 80% figure is the current cash-out rule.
Think of two gates. Gate one is the condo: is the project, or this single unit, eligible for FHA? Gate two is the lien math: do all the debts fit under 80%? Pass the first and fail the second, and you have no cash-out. Fail the first, and the lien math never gets run.
Key Terms Defined
Second lien: a loan secured by the same home that sits behind the first mortgage in repayment priority. A home equity loan or a home equity line of credit (HELOC) is a common example.
Combined loan-to-value (CLTV): the total of the first mortgage plus all other liens, divided by the home’s value.
Adjusted value: the appraised value after FHA’s adjustments. It is the denominator every cap calculation uses.
Subordination: a signed agreement in which the second-lien holder agrees to stay behind the new FHA first mortgage.
Single-Unit Approval (SUA): an FHA path that lets a lender insure one condo unit in a project that lacks full FHA approval.
Cash-out refinance: a new, larger mortgage that replaces your current one and pays you the difference. The CFPB notes you often pay closing costs on it.
How Does the Lender Count Each Lien?
Every lien that remains on the condo after closing counts. Every lien that gets paid off at closing drops out of the stack but comes out of your cash. Either way, the second lien reduces what you can take home.
Here is the order a lender typically follows:
1. Check the building. Is the project FHA-approved, or does the unit qualify for Single-Unit Approval? An ineligible building ends the file.
2. Check the borrower. FHA cash-out is for your principal residence. The program parameters Lendmire works with require that the home be owned and occupied for 12 months before the case number is assigned.
3. Get the appraisal. Adjusted value sets the ceiling. A lower appraisal shrinks the room.
4. List every lien. The title work shows the first mortgage, any second, any HELOC, and anything else recorded.
5. Decide each lien’s fate. Pay it off, or keep it and subordinate it.
6. Run the combined total. New first mortgage plus all liens that stay must be at or under 80% of adjusted value.
7. Underwrite the whole picture. You must qualify for the payments on every lien that remains.
The formula is simple. Take 80% of value. Subtract any second that stays. What is left is the largest new first mortgage. Then your existing first-mortgage payoff and closing costs come out of that, and what remains is your cash.
A Worked Example in Percentages
Picture a condo that appraises at 100 units of value, using round numbers so the logic stays clear.
- The cap is 80% of that, or 80 units of combined debt.
- Your existing first mortgage is 55% of value.
- You have a second lien at 10% of value.
Option A: pay off the second. The new first mortgage can reach up to 80%. It must cover the old first (55%), the old second (10%), and closing costs. That leaves roughly 15% of value, less costs, as your cash.
Option B: keep the second. The new first can only reach 70%, because the 10% second counts inside the 80% cap. After the old first (55%) and costs, you have roughly 15% of value, less costs, in cash. You also carry two payments.
The cash looks similar on paper here. The difference is the second lien’s cooperation. In Option B, the holder must agree to subordinate, and the lien keeps its own payment. Note that you never subtract the retained second twice. It reduces the new first once.
Now add a small appraisal miss. If value drops by a few percent, the 80% ceiling drops with it, but your old payoffs stay fixed. The cash shrinks faster than the value did. A thin cushion can disappear entirely.
What Are the Three Ways a Second Lien Gets Handled?
| Path | What happens | Effect on cash |
|---|---|---|
| Pay it off | Folded into the new loan | Comes out of your cash |
| Keep and subordinate | Stays behind the new first | Counts inside the 80% |
| Add a new second | Generally not allowed on cash-out | No extra room |
Paying it off is the cleanest path. One lien, one payment. The trade-off is a larger first mortgage and less cash to you.
Keeping it requires a formal subordination agreement. Many lenders also ask for the second’s note and deed. Those documents come from lender practice and are not spelled out in HUD’s text, so expect variation. The balance counts toward the cap either way.
Adding a new second to get more cash does not work. The 80% limit already covers combined debt, so a new second cannot lift you past it. Some lenders go further and do not permit new subordinate financing on a refinance at all.
Old Rules You May Still See Online
HUD’s Mortgagee Letter 2009-08 used an 85% combined cap. It also let an existing second stay in place behind the new FHA first, so long as the borrower qualified for payments on all liens. That letter is the source of the idea that an existing second can simply ride along.
Treat that as history. For cash-out, the current rule is the 80% combined limit. A second that stays is counted against it.
Does a HELOC Count at Its Balance or Its Limit?
Many lenders count the full available line, not just what you have drawn. That is lender practice, and it does not trace to a specific line in HUD’s current text. So check with your lender.
The practical effect is real. An unused HELOC with a large limit can block a cash-out. The usual fix is to pay it off and close it as part of the refinance. Ask for a written payoff and a closure request, not just a zero balance.
Where Does the Condo Gate Come In?
A condo unit needs either project approval or Single-Unit Approval. HUD’s FHA condominium page says SUA applies to a complete project with at least five units that is not manufactured housing. The project must also meet a subset of FHA requirements covering concentration, owner-occupancy and financial condition.
HUD’s release on the condo rule said SUA took effect October 15, 2019. It also described owner-occupancy and FHA-concentration expectations. The exact concentration breakpoints have been reported differently across sources, so ask your lender what applies to your building today. Think of it as a small share of units in the project that can carry FHA insurance.
The key point for you: building eligibility is independent of your equity. You can have a comfortable 80% math problem solved and still be turned away because the project fails. Checking the building’s status early is worth doing, because it costs little to learn and can spare you an appraisal fee.
Lenders also submit Form HUD-9991 on the single-unit path, per Handbook 4000.1. The Handbook is updated over time, so the current version is the one that governs.
Where the General Rule Breaks
- Paid-off home. A loan on a home with no mortgage still counts as cash-out when it puts money in your hands. Cash-out is defined by the proceeds, not by whether you had a loan.
- A second that funded more than the purchase. FHA classifies a refinance by the purpose of the second. A second that pulled out cash earlier can push a payoff into cash-out treatment. Confirm against the current Handbook.
- FHA Streamline. This is a different transaction. It refinances an existing FHA loan with no appraisal, a limited credit review and a net tangible benefit. It is not a cash-out and does not use the cash-out cap.
- Rate-and-term refinance. With an appraisal, the FHA rate-and-term refinance reaches 97.75% on a principal residence you have occupied for the previous twelve months. The 80% combined limit is a cash-out rule only.
- Second homes and rentals. Occupancy decides leverage. FHA cash-out is for the home you live in, so an investment unit does not fit this program.
- Exceptions in the letter. The mortgagee letter may carry program exclusions beyond what is described here. Do not assume exceptions beyond what HUD’s text says, and confirm the details with your lender.
What Does This Mean for Your Budget and Decision?
Cash. Every point of value a kept second takes up reduces the new first mortgage by the same amount. Paying it off converts it to part of the new loan, and the payoff comes out of your cash.
Monthly budget. A kept second means two payments. A payoff means one payment on a bigger first mortgage. Either way, you must qualify for what stays. On the FHA side, the base ratio pair is 31/43 (housing and total debt to income) with no compensating factors. Documented compensating factors can reach 40/50 at the top tier, and the automated finding governs most files.
Mortgage insurance. FHA charges an upfront premium of 1.75% of the base loan, which can be financed. It also charges an annual premium that depends on term, loan amount and LTV. At the 80% cash-out ceiling, which is at or below 90% LTV, the annual premium on a thirty-year loan ends after eleven years. This is a program mechanic, not a price quote.
Equity left over. The CFPB says lenders typically want you to keep 10% to 20% of home value as equity on a cash-out refinance, home equity loan or HELOC. The FHA cash-out cap leaves 20% by design.
Timing risk. Keeping a second needs the lender to sign. That is a dependency you do not control. Ask early.
Credit floor. The wholesale programs Lendmire places FHA loans with start at a 580 decision score. HUD itself has a lower tier for purchases, but the network does not reach below 580.
Mistakes That Sink These Files
- Assuming the second lets you borrow above the cap.
- Forgetting an unused HELOC still counts at its limit.
- Skipping the building check until after the appraisal.
- Leaning on an old 85% figure from an outdated page.
- Treating the 80% as your cash. It is a ceiling on total debt, and payoffs and costs come first.
- Not asking the second-lien holder for a subordination agreement before you commit to the plan.
What Should You Bring and Do First?
1. A current statement for every mortgage, HELOC or home equity loan on the condo.
2. The condo association’s name, so the lender can check project status.
3. Proof you have owned and lived in the unit for the required period.
4. A written plan for each second: payoff or subordination.
5. Your income and credit documents.
Program figures here are subject to lender guidelines and full file review. Nothing here is a commitment to lend. County loan limits apply and change every year.
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.
Frequently Asked Questions
Can I keep my existing second mortgage on an FHA condo cash-out?
Often yes, if the second-lien holder agrees to subordinate and the combined total stays at or under 80% of adjusted value. The second’s balance counts inside the cap. Lender requirements for the paperwork vary.
Can a new second lien get me more cash than the cap allows?
No. The cap covers combined debt, so a second lien cannot lift you above it. Some lenders do not allow new subordinate financing on a refinance at all.
Does an undrawn HELOC count?
Many lenders count the full available line, not just the drawn balance. An open HELOC with a large limit can block a cash-out unless you pay it off and close it.
Is there a lower cash-out cap just for condos?
Not that I found in HUD’s sources. The 80% combined limit is the same. The condo adds a separate eligibility test for the project or the single unit.
Is paying off my second lien free?
No. The payoff comes out of your cash proceeds, so you receive less. It simplifies the loan structure but does not add borrowing room.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s FHA loan programs page.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. 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
3. HUD Mortgagee Letter 2009-08
5. HUD press release on the FHA condo approval rule
6. HUD Handbook 4000.1 update transmittal
7. CFPB, Using home equity to meet financial needs
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: Can You Do an FHA Cash-Out Before the Occupancy Period Ends? · Can You Get an FHA Cash-Out on a Home With a Solar Lien? · FHA Cash-Out Refinance Requirements to Go Fixed
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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
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.