The Quick Read: An FHA cash-out refinance replaces your current mortgage with a new, larger FHA loan and pays you the difference in cash. You qualify by owning and living in the home for 12 months before the case number is assigned, keeping a clean payment record, and keeping the base loan within 80% of the home’s adjusted value. The new loan usually runs 30 years, so your payoff date moves out unless you choose a shorter term. Program figures are subject to lender guidelines and full file review.
Key Takeaways
- The base loan tops out at 80% of adjusted value. The payoff, financed costs, and your cash all fit under that one number.
- You need 12 months of ownership and occupancy, counted back from the FHA case number date.
- Your payoff date resets with a new term. Taking cash is a trade against time.
- The home must be your principal residence.
What Is an FHA Cash-Out Refinance?
It is a new FHA-insured mortgage that pays off your existing loan and puts the leftover equity in your hands. Your old loan doesn’t have to be an FHA loan. Policy for the program sits in HUD Handbook 4000.1, the FHA Single Family Housing Policy Handbook.
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.
This article covers the mechanics, start to finish.
Key Terms Defined
Adjusted value: The appraised value as HUD adjusts it for the loan-to-value test. The 80% cap is measured against this number, not the raw appraisal.
Case number: The FHA identifier the lender assigns when your application starts. It fixes which rules apply and starts the 12-month lookback.
Combined loan-to-value (CLTV): Your first mortgage plus any second liens, divided by value. On a cash-out, it is capped at the same 80%.
Upfront mortgage insurance premium (UFMIP): A one-time FHA premium of 1.75% of the base loan, typically financed into the balance.
Annual premium: FHA mortgage insurance billed monthly. It ranges from 0.15% to 0.75% of the balance, depending on term, loan amount, and LTV.
Amortization: The schedule that spreads principal and interest across the loan term. A new term starts that schedule over.
How Does the Loan Get Underwritten, Step by Step?
Underwriting follows a fixed order. Here it is for an FHA cash-out refinance.
1. Screen for eligibility. Confirm you’ve owned and lived in the home as your principal residence for the 12 months before the case number. Confirm the mortgage being paid off has a clean recent payment record. Lenders apply HUD’s payment-history test and may add their own overlays.
2. Apply and get a case number. The lender assigns the FHA case number. That date starts the lookback clock. It also locks the rule version. HUD’s Mortgagee Letter 2019-11 tied its LTV change to case-number date, which shows how much the date matters.
3. Review the Loan Estimate. You receive a Loan Estimate showing estimated closing costs, cash to close, and escrow items. On a cash-out, closing costs come out of the same capped loan amount. They either shrink the cash you receive or you pay them from your own funds. The federal consumer-finance regulator’s Loan Estimate explainer walks through each section.
4. Appraisal. A full appraisal sets the value. The base loan, including payoff, costs, and cash, must stay at or under 80% of adjusted value.
5. Underwriting review. The underwriter looks at credit, income, debt ratios, and payment history. The base ratio pair is 31/43 (housing over total debt) with no compensating factors. Documented compensating factors can reach 40/50 at the top tier, and the automated underwriting finding carries heavy weight in how the file is judged.
6. Mortgage insurance. The 1.75% upfront premium and the annual premium both apply. On a 30-year loan above 90% LTV the annual premium lasts the full term. At or below 90% it ends after eleven years. A cash-out capped at 80% falls in the second group, subject to the actual file. Each figure is subject to lender guidelines and a full review of property type, leverage, and credit.
7. Closing Disclosure and funding. The final numbers appear on the Closing Disclosure. You receive the cash after closing.
Why Is the Cap 80 Percent, and Why Does It Bind First?
HUD lowered the cap from a previous higher limit for case numbers assigned on or after September 1, 2019. HUD’s press release says the change aligned FHA with the Fannie Mae and Freddie Mac cash-out limit.
Here’s the catch. Eighty percent of value is not 80% of your equity. The payoff balance, financed costs, and your cash all fit inside that one cap. On a home with a large existing balance, there may be little cash left after those items. The financed upfront premium is added on top of the base loan, so the total balance runs a little above 80% of value and your equity after closing lands a little under 20%. County loan limits also apply, but for most homeowners the 80% test binds first.
A high credit score doesn’t lift the cap. The 80% applies regardless of score.
What Does the Restarted 30-Year Term Actually Do?
It moves your payoff date out and usually raises your payment. The CFPB’s guide on using home equity says a cash-out refinance may extend the time it takes to pay off the mortgage. It also says the payment may rise because the loan is larger, and the interest rate and other terms reset.
Picture a homeowner who is 11 years into a 30-year loan. A new 30-year loan means 41 years of total borrowing against the same house. That’s the clock restarting. Same house, longer road.
A few things to keep in mind:
- The new rate applies to the whole balance, not just the cash portion. Compare it against your current loan, not in isolation.
- A bigger balance plus FHA mortgage insurance usually raises the monthly cost.
- Cash-out turns equity into debt. The home is the collateral.
Ways to Take the Cash Without Losing Your Payoff Date
You are not locked into 30 years in every case. Ask the lender what terms the program supports on your file. Two common moves:
- Choose a shorter term if the payment and ratios allow it. A shorter term means a higher payment, so it has to fit your debt-to-income review.
- Make extra principal payments on a 30-year loan to pull your payoff date closer than the full term. The required payment stays at the 30-year level, and you decide each month whether to pay extra.
Where Does the General Rule Break?
Several edge cases change the answer.
Home owned less than 12 months. A standard cash-out isn’t available. Appreciation does not shorten the wait.
Inherited home that is rented out. The occupancy test still applies. A rented-out inherited home doesn’t count until you’ve lived in it as your principal residence for 12 months.
Second homes and rentals. Cash-out is a principal-residence product. Occupancy decides the leverage.
FHA Streamline. It takes no cash out. It refinances an existing FHA loan with no appraisal, a limited credit review, and a net tangible benefit.
FHA rate-and-term. With an appraisal, it reaches 97.75% on a principal residence occupied for the previous twelve months. No cash comes out, which is why it can borrow more.
Existing FHA loan. If you’re refinancing FHA into a new FHA loan, a partial upfront premium credit may apply. Ask the lender how it reduces your new premium. It isn’t paid in cash.
Free-and-clear homes. These can still be financed as a cash-out under the same 80% cap.
Hawaiian Home Lands. HUD’s 80% cut did not apply to loans insured under Section 247, per a law-firm summary of the letter.
What Gets Applications Denied?
| Denial cause | What it looks like | Fix |
|---|---|---|
| Under 12 months | Case number lands before the anniversary | Wait, then apply |
| Payment history | Late payments on the mortgage being paid off | Build a clean record first |
| Low appraisal | Adjusted value cuts the 80% room | Ask about appraisal reconsideration with recent nearby sales |
| Ratios too high | Debt-to-income exceeds the file’s limit | Pay down debts or document compensating factors |
| Thin cash after costs | Payoff plus costs eat the 80% | Pay costs from your own funds or take less cash |
Appraisal reconsideration is a routine step. A packet with recent nearby sales and condition notes can recover value when comps come in light.
Should You Restart the Clock?
It depends on what the cash does for you. CFPB research on cash-out borrowers, summarized in this CFPB report, finds borrowers often use proceeds to pay down credit card and auto debt. Swapping short-term debt for mortgage debt can raise foreclosure risk because the home secures it.
| Situation | Restart usually makes sense? |
|---|---|
| Cash funds a repair that protects the home’s value | Often yes |
| Cash replaces high-cost consumer debt, with a plan to avoid new debt | Sometimes |
| You’re close to paying off the current loan | Rarely |
| Cash covers spending with no lasting value | Rarely |
| Payment would strain your budget | No |
Keep in mind that a cash-out at the 80% cap leaves roughly 20% equity after closing, a little less once the financed premium is counted, and every extra dollar you borrow shrinks that cushion. Compare against a home equity loan or HELOC if you only need a smaller amount and want to leave your first mortgage alone.
What Should You Have Ready Before Applying?
Gather these first:
- Recent pay stubs, W-2s, and tax returns for income review.
- Two recent months of bank statements.
- Your current mortgage statement showing the payoff and payment history.
- Homeowners insurance declarations and proof of property taxes.
- Photo ID and Social Security number for the credit pull.
Lenders can ask for more. Clean documents give the file fewer preventable gaps.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Frequently Asked Questions
Do I need an existing FHA loan to do an FHA cash-out refinance?
No. The loan being paid off can be a conventional or other mortgage. The new loan is the FHA-insured one. If your current loan is FHA, a partial upfront premium credit may reduce the new premium.
Does the 12 months run from closing?
No. It runs back from the date the FHA case number is assigned. At least one borrower must have owned and lived in the home as a principal residence for that full lookback period.
Can I borrow 80% of my equity?
No. The cap is 80% of the home’s adjusted value, and the payoff, financed costs, and cash all fit inside it. The financed upfront premium sits on top of that base loan, so equity left after closing is roughly 20% of value, slightly less once the premium is added.
Will my payment go down with a cash-out?
Not necessarily. A larger balance, FHA mortgage insurance, and a restarted term can all raise it. Compare the full loan terms against your current loan before deciding.
Can an FHA Streamline take cash out?
No. The Streamline refinances an existing FHA loan with no appraisal and a net tangible benefit. If you want cash, you need the cash-out program.
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 your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s FHA loan programs page.
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. HUD Handbook 4000.1, FHA Single Family Housing Policy Handbook
2. HUD Mortgagee Letter 2019-11
3. CFPB Loan Estimate explainer
4. HUD press release on cash-out refinance risk
5. CFPB guide on using home equity
6. Consumer Finance Monitor (ML 2019-11 summary)
7. CFPB: CFPB Report Finds Cash Out Mortgage Refinance Borrowers Improve Credit Scores
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 Qualify and Apply for an FHA Cash-Out Refinance on a Recently Bought Home · How to Qualify and Apply for an FHA Cash-Out Refinance Instead of Streamline
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
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- 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.