The Quick Read: You roll closing costs into an FHA cash-out by letting the new loan cover them, as long as the total stays under the program’s loan-to-value cap. There is no separate “financing” feature. The new loan pays off your old mortgage, covers the costs, and sends you whatever cash is left. If the costs and payoff don’t fit under the cap, you bring cash or take less out. All of this is subject to lender guidelines and full file review.
Key Terms Defined
Cash-out refinance: A new mortgage that pays off your current loan and gives you the leftover equity as cash.
Loan-to-value (LTV): The new loan balance divided by the home’s value, shown as a percentage.
Combined LTV (CLTV): The same ratio, counting every loan secured by the home, including second mortgages.
Adjusted value: The value FHA uses to apply its cap. It starts with the appraisal, and the rules can adjust it.
Closing costs: The upfront charges to set up the loan, such as lender fees, appraisal, title work, and prepaid items.
Cash to close: The amount you must bring to the table after deposits, credits, and financed costs.
Cash out: Money paid to you from the loan proceeds. It is a different thing from cash to close.
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.
What Does “No Cash to Close” Mean on a Cash-Out?
It means the new loan is big enough to cover three things: the payoff of your old liens, the closing costs, and any cash you take. Your own wallet stays closed. The loan amount does all the work.
Here is where people get tangled. Cash to close and cash out are separate lines on separate pages. Cash to close is what you owe at the table. Cash out is what you receive. On a cash-out file, you can have zero due at closing and still walk away with money.
There are really three ways to cover costs on a cash-out:
| Method | How it works | Tradeoff |
|---|---|---|
| Pay out of pocket | You bring cash at closing | Smallest balance, but cash needed |
| Net from proceeds | Costs come out of your cash-out | Smaller check at closing |
| Finance into the loan | Costs added to the new balance | Bigger balance, more interest over time |
The Loan Estimate is where you can see which method is in play. The CFPB’s guide to the Loan Estimate and Closing Disclosure forms shows a “Calculating Cash to Close” table. It includes a line called “Closing Costs Financed (Paid from your Loan Amount).” That is the line to read.
One more option exists, and it comes with a catch. Some lenders offer a “no-cost” refinance. The costs are not gone. They are built into the loan terms instead of billed up front, so you pay them over time another way.
The Cap That Decides Everything
The cap is 80% of adjusted value, and it applies to the total of all liens. HUD cut the FHA cash-out maximum from 85% to 80% in Mortgagee Letter 2019-11. HUD’s press release says the change aligned FHA with the maximum cash-out leverage that Fannie Mae and Freddie Mac allow.
Some older web pages still say 85%. That is outdated. Across the wholesale programs Lendmire places FHA files with, the cash-out reaches 80% LTV on a home you have owned and lived in for 12 months before the case number. Final terms depend on lender guidelines, property type, leverage, and a full review of your credit picture.
Think of the cap as the size of a bucket. Your old mortgage goes in first. Closing costs go in next. Whatever room is left is your cash. If the bucket is already full, there is no room for costs, let alone cash.
How the Math Runs, Step by Step
Here is the order a loan officer works through. No dollar figures here, just the logic.
1. Start with the value. A full appraisal sets the starting point. The 80% cap applies to adjusted value.
2. Find the maximum new loan. Multiply adjusted value by 80%.
3. Subtract the payoff. Take out the balance on your current mortgage, plus any other liens.
4. Subtract the costs. This covers lender and third-party fees and prepaid items. Ask your loan officer how the FHA upfront mortgage insurance premium is treated on your file if you finance it.
5. What remains is your cash. If it is zero, you roll everything in and take nothing. If it is positive, that is your cash out.
6. Check the loan limit. The new loan also cannot exceed the FHA county loan limit for your property. County loan limits apply and change every year, so confirm the limit for your area.
Picture a homeowner whose payoff sits at about 60% of the home’s value. The cap leaves roughly 20 points of room. Closing costs take a slice of that. Whatever is left is the cash. Now picture a homeowner whose payoff is already near 78%. Almost nothing is left, and the costs may not fit at all.
A low appraisal hurts more than it looks. The cap is a percentage of the lower value, so your available cash shrinks faster than the value itself.
How Mortgage Insurance Fits In
FHA charges two kinds of mortgage insurance. The first is an upfront premium of 1.75% of the base loan, which can be financed into the balance. The second is an annual premium between 0.15% and 0.75% of the balance, depending on term, loan amount, and LTV.
On a standard FHA cash-out, which is capped at 80% LTV, the annual premium on a thirty-year loan ends after eleven years. The full-term rule applies only to thirty-year loans above ninety percent LTV, which a standard cash-out does not reach. These are program facts, subject to lender guidelines.
The upfront premium matters for this topic. If you finance it, it is added to the loan balance along with your costs. Ask your loan officer to show how it is treated on your file before you count on any particular amount of cash.
Can You Qualify? The Gate Before the Math
The math only matters if you clear the eligibility gate. The standard FHA cash-out requires that at least one borrower has owned and lived in the home as a principal residence for the 12 months before the case number is assigned. That is a lookback from the case-number date, not the closing date. HUD Handbook 4000.1 is the controlling source.
Your payment history on the mortgage being refinanced also gets reviewed. Late payments inside the lookback window can keep you out of a cash-out.
Then the usual underwriting applies:
- Credit: the wholesale programs we place with start at a 580 decision score for maximum financing.
- Ratios: the base pair is 31/43 (housing and total debt to income), and documented compensating factors can reach 40/50 at the top tier. The automated finding governs most files.
- Occupancy: this is a principal-residence product. Second homes and rentals are not standard FHA cash-out, and occupancy is what decides the leverage.
Meeting these tests does not guarantee approval. Lenders can add their own overlays on top of HUD’s minimums.
Where the Rule Breaks
The general rule is simple. The exceptions are where files stall.
Second liens. The 80% cap applies to all liens combined. A second mortgage does not get you past it.
A recent purchase. If you bought the home recently, you generally cannot use the standard cash-out until the 12-month test is met. Inherited or rented homes usually need you to live in them first. Confirm the specifics against the handbook.
A free-and-clear home. HUD permits cash-out on a home with no mortgage, and the same cap applies. Some websites claim a shorter wait for these homes. Treat that with caution and confirm it with your loan officer before relying on it.
A tight payoff. If your existing balance already sits near the cap, you probably cannot roll in costs. You would bring cash or skip the refinance.
Special programs. Hawaiian Home Lands (Section 247) mortgages were left out of the 80% change, so a different limit applies to them. That is a narrow case, and your loan officer can tell you which limit governs your file.
Tapped-out equity. Costs you finance count toward the loan balance, so each financed dollar uses up room under the cap and leaves less available as cash to you.
When a Different FHA Refinance Fits Better
Cash-out is not the only FHA refinance. If you do not need the money, another type may be a cleaner path to little or no cash at closing.
| Refinance type | Appraisal | Cash out? | Best for |
|---|---|---|---|
| FHA Streamline | None | No | Existing FHA loans |
| FHA rate-and-term | Yes | No | Reaching 97.75% on a principal residence |
| FHA cash-out | Yes | Yes | Tapping equity, up to 80% |
The Streamline refinances an existing FHA loan with no appraisal and a limited credit review. It requires a net tangible benefit, and the mortgage insurance premium continues. It is usually the easiest route to a no-cash-to-close refinance when you do not need cash.
The rate-and-term refinance uses an appraisal and reaches 97.75% on a principal residence you have occupied for the previous twelve months. It has far more room under its cap, so rolling in costs is easier.
A conventional cash-out follows different seasoning rules, set by Fannie Mae and Freddie Mac.
What Rolling In Costs Does to Your Budget
Financed costs are not free. They enlarge the loan balance. That raises your monthly payment and your mortgage insurance slightly, and you pay interest on those costs for the life of the loan.
Compare three paths on total cost, not just on day-one cash:
- Pay out of pocket. You keep the balance smaller and pay the least interest, if you have the cash.
- Roll costs in. You keep your cash, but the balance and interest grow.
- Take the “no-cost” route. You avoid up-front charges, but the costs return through the loan terms.
Because financed costs are less visible, they are easier to overlook. That is why the paperwork matters.
Read the Paperwork
The CFPB’s Loan Estimate explainer draws a clear line. Closing costs are the upfront charges to get the loan. Cash to close is what you must bring after deposits, credits, and other adjustments.
Ask your loan officer to show you the closing costs financed and the resulting cash to close or cash to borrower. A negative cash-to-close figure means money is coming to you.
Compare the Loan Estimate with the Closing Disclosure you receive before closing. Fees should not jump. The CFPB’s Your Home Loan Toolkit says it is illegal for a lender to quote low fees and then surprise you with much higher ones later.
Questions to bring to the conversation:
- What is my adjusted value likely to be, and what is the maximum new loan at 80%?
- After my payoff, how much room is left for costs?
- Is the upfront premium financed, and how is it treated on my file?
- If the appraisal comes in low, what happens to my cash?
- Does the lender add overlays beyond HUD’s minimums?
- Does the county loan limit apply to my property?
Common Misconceptions
“FHA cash-out goes to 85%.” That claim is outdated, since the cap is 80% for case numbers assigned on or after the HUD change.
“Rolling in costs means no costs.” The costs are still owed. They are added to the balance and repaid with interest.
“No cash to close means no cash out.” They are separate. Both can appear on the same file.
“The appraisal is the cap.” The cap applies to adjusted value, and county loan limits can bind first.
“Meeting seasoning means approval.” Credit, income, and lender overlays still apply.
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 roll closing costs into an FHA cash-out refinance?
Yes, if the total new loan stays under the cap. The costs are added to the loan amount, alongside your payoff and any cash you take. If everything does not fit under 80% of adjusted value, you bring cash or take less out.
Is the FHA upfront mortgage insurance premium financed too?
It can be. The upfront premium is 1.75% of the base loan, and it commonly rolls into the balance. Ask your loan officer how it is treated against the cap on your file. Terms are subject to lender guidelines and full file review.
What happens if my appraisal comes in low?
Your available cash shrinks faster than the value does. The 80% cap is applied to the lower figure, so the room for costs and cash drops. In a tight file, the costs may no longer fit.
Is there a waiting period before I can do a cash-out?
Yes. The standard FHA cash-out requires at least one borrower to have owned and lived in the home as a principal residence for the 12 months before the case number. Your payment history on the current mortgage also gets reviewed.
Is a Streamline a better way to avoid cash at closing?
It can be, if you already have an FHA loan and do not need cash back. The Streamline has no appraisal and no cash out. It requires a net tangible benefit, and the premium continues.
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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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. CFPB: Guide to the Loan Estimate and Closing Disclosure forms
2. HUD Mortgagee Letter 2019-11
3. HUD Archives press release PR 19-114
5. CFPB: Loan Estimate explainer
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 Clear the Conditions That Slow an FHA Cash-Out · How to Close an FHA Cash-Out Through a Broker Step by Step · FHA Cash-Out vs Conventional Cash-Out After a Withdrawn Listing
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.