The Quick Read: Two ceilings apply to every FHA cash-out refinance, and the lower one decides your loan size. The first is a value test: the new loan, plus any second lien, cannot pass 80% of your home’s adjusted value. The second is the county loan limit. In a high-cost county the 80% test almost always binds first, so a higher county limit does not let you borrow more than 80% of value. It only stops the dollar cap from cutting you off sooner.
Key Takeaways
- The new loan must cover your old first mortgage, any second lien you keep, and the costs of the refinance. Your cash is whatever is left under the cap.
- At least 20% of your home’s value stays in the home after closing.
- Credit score does not raise the 80% cap. It affects approval, not the ceiling.
- County limits reset each year. Look up yours instead of assuming.
What Is an FHA Cash-Out Refinance?
An FHA cash-out refinance replaces your current mortgage with a new FHA-insured loan that is larger than what you owe. The difference, after costs, comes to you as cash. FHA insures the loan, and that insurance is why the program reaches borrowers with modest credit scores.
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.
It is built for a home you live in. The core rule is simple: the FHA cash-out reaches 80% LTV on a home you have owned and occupied for 12 months before the case number is assigned. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
LTV means loan-to-value. It is the loan balance divided by the home’s value, shown as a percentage. A loan of 80% LTV leaves 20% of the value untouched.
A free-and-clear home counts too. If you own the home outright and take out a new FHA loan, the lender treats it as a cash-out. The same goes for a home you inherited, subject to lender guidelines.
The 80% Value Test: Limit One
The 80% test is the one that shapes most files. FHA lowered the cash-out cap from 85% to 80% of adjusted value for loans with case numbers assigned on or after September 1 of the year the change took effect. HUD’s mortgagee letter on the cash-out cap says FHA had last moved the cap in an earlier change from 95% to 85%.
HUD gave a plain reason. A HUD release on cash-out risk says cash-outs made up 64% of FHA refinances, and the letter says a bigger equity cushion reduces the loss if a loan goes bad. Think of the 80% cap as the insurance fund protecting itself.
Three details trip up borrowers:
- The test covers the whole stack. The new first mortgage and any second lien you keep count together toward the 80%.
- The value is “adjusted value.” That is the appraised value after FHA’s adjustments, not simply the number on the appraisal cover page.
- A low appraisal shrinks everything. A lower value cuts the cap, and because your payoff stays fixed, the cash falls by even more in proportion.
The County Limit: Limit Two
Every county has a maximum FHA loan size, and it changes every year. HUD’s FHA lender page lists the current limits and links a county lookup tool. Lendmire does not quote county dollar figures here, because they reset each year and your county’s number is what matters.
The structure is useful to understand. Per the Scotsman Guide, the FHA floor is 65% of the national conforming limit. The ceiling is 150% of that limit. A county between the two is set at 115% of its local median home price.
So a “high-cost county” is one where the limit sits well above the floor, up to the ceiling. Some areas, including Alaska, Guam, Hawaii and the U.S. Virgin Islands, have a higher special ceiling. A county between floor and ceiling needs a direct lookup. Do not guess from a neighboring county.
Limits also rise with unit count. A one-unit home has the lowest limit. Two-, three- and four-unit owner-occupied homes carry higher ones, which is a lookup too.
Which Limit Binds?
The county limit only matters when 80% of your home’s adjusted value is larger than the limit. Flip that around: the limit binds when the home is worth more than 1.25 times the county limit. That is just the inverse of 80%.
Even in the highest-cost county, that is a very expensive home. Most borrowers in high-cost counties hit the 80% test first. The higher limit simply means no dollar cap gets in the way.
| Situation | Which limit binds | What it means |
|---|---|---|
| Home value under 1.25x county limit | 80% value test | County limit is not the issue |
| Home value over 1.25x county limit | County limit | Equity is left on the table |
| Floor-limit county, mid-priced home | Usually 80% test | Check the county number anyway |
| High-cost county, typical home | 80% value test | Higher limit gives no extra equity |
| Existing loan already above the limit | County limit | A new FHA loan may not fit |
How the Loan Is Underwritten, Step by Step
Here is the path a file takes. The steps are the same in every county.
1. Case number. The lender assigns an FHA case number. The 12-month owner-occupancy test is measured back from that date, and the county limit in force on that date applies.
2. Appraisal. The appraiser sets the value. That value, after adjustments, is the base for the 80% test.
3. Compute the cap. Take 80% of adjusted value and compare it with the county limit. The lower figure is your ceiling.
4. Subtract what must be paid off. The new loan replaces your first mortgage. A second lien you keep counts inside the 80% cap.
5. Subtract costs. Closing costs and the financed upfront premium come out of the same cap before any cash reaches you.
6. Underwrite the borrower. The lender reviews credit, payment history and debt-to-income ratios.
7. Close and endorse. The loan is insured at endorsement, and the premium schedule applies.
Typical documents are the current mortgage statement, income and asset records, an appraisal and title work. Your lender will tell you what a given file needs.
On credit and ratios, the wholesale programs Lendmire places FHA loans with start at a decision score of 580. Debt-to-income starts from a 31/43 pair of housing and total ratios with no compensating factors. Documented factors can stretch that toward 40/50 at the top tier. All of it is subject to lender guidelines and a full file review.
A Worked Example in Percentages
These numbers are modeled assumptions, not market data. Say your home’s adjusted value is 100% of itself, in a high-cost county where the limit is far above 80% of your value.
- The cap: 80% of value.
- Your first mortgage payoff: 50% of value.
- A second lien you keep: 5% of value.
- Closing costs and the financed premium: about 4% of value, as a rough modeled slice.
- What remains for cash: about 21% of value.
The 80% test decides every step, and the county limit never enters. Change one input and the picture shifts. If the appraisal comes in 5% lower, the cap and your cash both fall. If the second lien disappears, your cash rises by that slice.
Now picture a home so valuable that 80% of its value passes the county limit. Then the limit is the cap, not the 80%. Your cash is the county limit minus payoff and costs, and some equity stays locked even beyond the required 20%. That is the one case where “high-cost county” really limits you.
Why Your Cash Is Less Than Your Equity
Many borrowers confuse equity with cash. Equity is what your home is worth minus what you owe. Cash out is a smaller number.
Three things stand between them. First, FHA keeps 20% of value in the home. Second, the new loan covers closing costs and the financed upfront premium. Third, any second lien you keep eats into the same cap.
The upfront premium is 1.75% of the base loan, and borrowers usually finance it. The annual premium runs between 0.15% and 0.75% of the balance depending on term, loan amount and LTV. On a thirty-year loan at or below 90% LTV, which a cash-out at 80% would be, the annual premium ends after eleven years. These are program facts, not prices, and both are subject to lender guidelines.
That mortgage insurance, plus a bigger balance, raises your monthly payment. Plan your budget around the full payment, not just the cash you will receive.
Where the General Rule Breaks
Some situations bend the usual picture.
- Existing loan above the limit. If your current balance already passes the county limit, a new FHA loan cannot exceed that limit. Cash may be zero.
- Area between floor and ceiling. The limit is 115% of the local median home price. It can change when the annual limits are published, including downward in some areas.
- Multi-unit owner-occupied homes. Limits rise with unit count, but you must live in one unit. Occupancy decides the leverage.
- Rate-and-term refinances. These differ. The FHA rate-and-term with an appraisal reaches 97.75% on a principal residence occupied for the previous twelve months. The 80% cap belongs only to cash-out.
- Streamline refinance. It refinances an existing FHA loan with no appraisal and a limited credit review, but it cannot pay out cash.
- Reverse mortgages. FHA’s reverse-mortgage product, known as a HECM, has its own separate limit and different rules.
- Hawaiian Home Lands loans. The 80% change does not apply to Section 247 loans. That is a niche exception.
- State law. Some states add their own cash-out requirements. Your lender will flag any that apply.
Key Terms Defined
Adjusted value: the appraised value after FHA’s adjustments. The 80% test uses this number.
CLTV (combined loan-to-value): all loans on the home, first and second lien together, divided by the home’s value.
County loan limit: the maximum FHA loan size for your county and unit count, reset each year.
High-cost county: a county where the FHA limit sits above the national floor, up to the ceiling.
Upfront premium: the one-time FHA mortgage insurance charge, usually financed into the loan.
Seasoning: the waiting period between owning and occupying a home and refinancing it. For cash-out, it is 12 months before the case number.
When the FHA Cap Blocks the Equity You Want
If you need more than 80% allows, FHA is the wrong tool for that job. Your options are conventional or jumbo cash-out, a home equity line of credit, or a second lien. Each has its own rules.
| Option | Strength | Tradeoff |
|---|---|---|
| FHA cash-out | Reaches lower credit scores | 80% cap and mortgage insurance |
| Conventional cash-out | Often lower insurance cost | Tighter credit standards |
| Jumbo cash-out | Handles larger balances | Stricter file requirements |
| HELOC | Keeps your first mortgage | Variable and separate payment |
| Second lien | Leaves first loan alone | Second payment and own limits |
A second lien changes the math if you keep your first mortgage and add a new one. Programs differ by lender, so compare real terms before choosing.
What the Decision Looks Like in Practice
Start with your county limit and unit count. Then estimate adjusted value and take 80% of it. Subtract your first mortgage, any second lien and a slice for costs. That gives you a rough ceiling on cash.
Then weigh three questions. Is the cash worth the larger balance and the added mortgage insurance? Would keeping your current loan and using a separate product serve you better? Does your credit and debt-to-income picture fit the 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.
Frequently Asked Questions
Does a high-cost county let me borrow more than 80% of my home’s value?
No. The county limit only caps the dollar size of the loan. The 80% of adjusted value test applies in every county. A high-cost county matters mainly when the home is worth more than 1.25 times the county limit.
Do I need to already have an FHA loan?
No. You can refinance a conventional or other mortgage into an FHA cash-out, or do it on a home you own free and clear. The home must be your principal residence, owned and occupied for 12 months before the case number, subject to lender guidelines.
Does a higher credit score unlock more equity?
No. The cap is the same for every borrower. Score affects approval and pricing, not the 80% ceiling. The programs Lendmire places FHA loans with start at a decision score of 580.
What if my appraisal comes in low?
The cap and the cash both shrink. The 80% test runs against adjusted value, so a lower value cuts your ceiling in direct proportion. A pending second lien can reduce or eliminate available cash as well.
How often do the limits change?
County limits reset each calendar year, and the rules can change between them. HUD’s lender page lists the current numbers and links a county lookup, so check it before you plan around any figure. Program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Lendmire arranges FHA, VA, conventional and jumbo purchase and refinance loans through wholesale lenders; every file is underwritten by the lender under the applicable program guidelines.
Scotsman Guide named Lendmire a Top Mortgage Workplace in 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 on the FHA cash-out cap
2. HUD release on cash-out refinance risk
3. HUD FHA Lenders: Maximum Mortgage Limits
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: VA Cash-Out vs FHA Cash-Out on a Solar Lien in a High-Cost State · How Much an FHA Cash-Out Lends on a Condo Without Project Approval · FHA Cash-Out vs Selling for a First-Time Equity Borrower in Divorce
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.