The Quick Read: A higher home value helps, but it does not set your cash. An FHA cash-out refinance lets you borrow up to 80% of your home’s appraised value. The new loan pays off your old mortgage, covers costs, and sends you the rest. You also need to have owned and lived in the home for 12 months. And you need a clean recent payment record. Everything is subject to lender guidelines and full file review.
Key Takeaways
- The cap is 80% of the adjusted value, so at least 20% equity stays in the home.
- A bigger appraisal raises your ceiling. It does not guarantee a bigger check.
- You need 12 months of ownership and occupancy, plus on-time payments.
- You do not need an existing FHA loan to do an FHA cash-out.
- Costs and mortgage insurance come out of the new loan before you see cash.
What Is an FHA Cash-Out Refinance?
It is one new, larger mortgage that replaces your current one. Part of it pays off the old loan. Part covers closing costs. You keep the remainder as cash. The CFPB’s guide to using home equity describes it the same way, and warns that your payment may rise and your payoff may stretch out.
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 loan is insured by the Federal Housing Administration, which is why lenders will work with borrowers who have modest credit. It is for the home you live in. Occupancy decides leverage here. A second home or rental does not follow this path.
This is not a HELOC. A HELOC or home equity loan sits behind your first mortgage. A cash-out refinance replaces the first mortgage entirely.
Does a Home Value Jump Actually Change What You Can Borrow?
Yes, but only through the appraisal. Your equity is the gap between what the home is worth and what you owe. When value climbs, that gap widens. The 80% cap then applies to a bigger number.
Online estimates do not count. FHA requires a full appraisal, and the appraiser’s figure drives the math. One caution: the cap applies to the “adjusted value,” not just the raw number on the report. Your lender handles that adjustment.
Picture a homeowner whose house has appreciated sharply. Their balance has barely moved because they have been paying down slowly. The 80% ceiling now sits well above what they owe. The difference, minus costs and premiums, is the cash. Run the same case with a smaller jump and the room shrinks fast.
What Are the Qualification Rules?
Across the wholesale programs Lendmire places FHA loans with, these are the core tests.
- Leverage: the FHA cash-out reaches 80% LTV. HUD Mortgagee Letter 2019-11 set that cap for case numbers assigned on or after September 1, 2019. Older guides still show higher numbers. They are out of date.
- Occupancy and ownership: the home must be your principal residence. You must have owned and lived in it for 12 months before the case number is assigned.
- Payment history: HUD requires payments made within the month due for the previous 12 months on the loan being refinanced.
- Credit: the wholesale programs placed through Lendmire start at a 580 decision score. HUD itself allows a lower tier, but the network does not reach below 580.
- Debt ratios: the base pair is 31/43, housing to total debt, with no compensating factors. Documented compensating factors can stretch the ratios to 40/50 at the top tier. An automated finding governs most files.
- Loan size: county loan limits apply. They change every year, so check yours rather than assuming.
For most homeowners the 80% test binds before the county limit does.
Free-and-clear homes can qualify too. If you own the house outright, a cash-out refinance simply puts a first mortgage on it.
How Is the Loan Underwritten, Step by Step?
Here is the path from first call to closing table.
1. Clock check. Confirm you have 12 months of ownership, 12 months of occupancy, and a spotless 12-month payment record. Miss one and you wait.
2. Equity estimate. Take a realistic value, multiply by 80%, and subtract your payoff. That gives you a rough ceiling before costs.
3. Application. You give the lender income, asset, and identity documents. Expect pay records, bank statements, and a current payoff statement.
4. Appraisal. An FHA-approved appraiser values the home. This is the step that turns your value jump into a real number.
5. Underwriting. The lender reviews credit, income, debts, and your payment record. If your credit report does not show 12 months of payments, the lender may have to verify them with your servicer.
6. Loan Estimate. You receive this form after applying. Compare it with others. The CFPB suggests collecting estimates from at least three lenders.
7. Closing Disclosure. You get this form before closing, with three business days to review it.
8. Funding. The new loan pays off the old one and the costs. Whatever remains is your cash.
A broker can run steps 2 and 6 side by side. That means comparing loan structures before you commit to one.
How Much Cash Will You Really Walk Away With?
Your cash is the 80% ceiling on the adjusted value, minus everything that has to be paid out of it. After your old balance is paid off, three costs come off the top.
Closing costs. These typically include origination charges, the appraisal, title work, and other fees. No official percentage exists for FHA cash-out, so ask each lender for a full Loan Estimate.
The upfront mortgage insurance premium. FHA charges 1.75% of the base loan. It is usually financed into the balance. That raises the loan but keeps cash out of your pocket at closing.
Annual mortgage insurance. This is charged monthly, between 0.15% and 0.75% of the balance depending on term, loan amount, and LTV. On a thirty-year loan above 90% LTV, it lasts the full term. At or below 90%, it ends after eleven years. A cash-out at 80% falls in the shorter bucket. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Think of the 80% ceiling as the top of a bucket. Your payoff and the costs above are poured out of it first, and only what remains is yours.
What If the Appraisal Comes In Low?
You have options, and none are dramatic.
- Take less cash. The cap shrinks, so the check does too. If your balance is low, you may still clear something useful.
- Ask about a review. Your lender can tell you whether the appraiser’s comparable sales can be challenged. Nothing is guaranteed.
- Wait and reapply. Values change. A fresh case number later may produce a different result.
- Switch structures. If your goal is a lower balance rather than cash, other refinance paths may fit better. More on those below.
The worst move is spending the cash in your head before the appraisal is done. This is the number lenders cannot soften.
Where Does the General Rule Break?
The 80% and 12-month rules cover most borrowers. A few cases bend them.
You bought recently. The 12-month ownership test generally blocks a standard FHA cash-out. If your value jumped fast but you closed on the house last spring, the program is closed to you for now. For homes owned under a year, the FHA approach has been to use the lesser of appraised value or sales price, so even then a big jump may not count.
You want to keep your FHA loan and only lower your payment. The FHA Streamline refinances an existing FHA loan with no appraisal, a limited credit review, and a net tangible benefit. No cash comes out. The premium continues.
You want a refinance but not cash. The FHA rate-and-term reaches 97.75% on a principal residence occupied for the previous twelve months. That is far more leverage than the cash-out, because you are not pulling equity.
You have a past credit event. HUD’s waiting periods are two years from a Chapter 7 discharge and three years from a foreclosure. Those are HUD’s rules, not a promise from any lender.
Your loan is not FHA today. You do not need to hold an FHA loan to refinance into one. Conventional and other loan types can be refinanced into FHA, subject to the tests above.
You hold a Hawaiian Home Lands (Section 247) loan. That is a narrow exception, so confirm it with a lender before relying on it.
How Does It Compare With Other Ways to Tap Equity?
| Option | What it does | Main tradeoff |
|---|---|---|
| FHA cash-out | Replaces first mortgage, cash at 80% LTV | Mortgage insurance, full refinance |
| FHA Streamline | Replaces FHA loan, no cash out | No appraisal, no cash |
| FHA rate-and-term | Replaces loan, up to 97.75% LTV | No cash out |
| HELOC or home equity loan | Adds a second lien | Keeps your first mortgage as is |
The question is not which product is best. It is what you are solving. If your current mortgage is one you like, a second lien keeps it intact. If you are replacing it anyway, the cash-out folds everything into one payment.
Is It the Right Move for You?
Cash-out refinancing puts your home behind a bigger debt. A CFPB research paper warns that turning other debts into mortgage debt can put the home at risk if payments become unsustainable.
That should shape your decision. Use this short test.
- Does the cash pay for something that lasts, like a repair or a debt you will not rebuild?
- Can you afford the new payment with room to spare?
- Does keeping your current loan make more sense than replacing it?
- Have you compared full Loan Estimates, not just headlines?
If you answer no to the first or second, slow down.
Key Terms Defined
Adjusted value: the property value HUD uses for the leverage test, which can differ from the raw appraisal.
LTV (loan-to-value): the loan amount divided by the home’s value.
Case number: the FHA identifier assigned to your file. It fixes which rules and loan limits apply.
Mortgage insurance premium (MIP): FHA’s insurance charge, paid upfront and annually.
Payment history: your record of on-time payments on the loan you are refinancing.
Net tangible benefit: a measurable gain the borrower must get from a Streamline refinance.
Frequently Asked Questions
Can I use an FHA cash-out refinance if I do not have an FHA loan now?
Yes. Your current loan can be any type. What matters is that you meet the ownership, occupancy, payment history, and credit tests for the new FHA loan.
How much equity do I need to keep?
At least 20%. The program caps the new loan at 80% of adjusted value, so that cushion stays in the home. Your actual cash is lower once the payoff, costs, and premium are subtracted.
Does a rising home value automatically raise my cash-out amount?
No. Only the appraisal counts, and only up to 80% of adjusted value. County loan limits also apply, and lenders review credit, income, and payment history separately.
What documents should I gather first?
Income records, recent bank statements, identification, and a current payoff statement. Proof that you live in the home also helps. Your lender will tell you what else your file needs.
Can I do an FHA cash-out on a rental or second home?
No. Occupancy decides leverage here. The program is for the home you live in as your principal residence.
Next Step
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. Nothing here is a commitment to lend. Every parameter is subject to lender guidelines and full file review.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. 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, Using home equity guide
2. HUD Mortgagee Letter 2019-11
3. CFPB, finding the best mortgage loan
4. CFPB, cash-out refinances and non-mortgage debt
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 While Between Jobs · 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 Without Selling the House
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
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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.