How Much FHA Cash-Out Lends on a Duplex You Live In

The Quick Read: The ceiling is 80% of your home’s appraised value, and a duplex gets the same cap as a one-unit house. That 80% is the new base loan, and it has to pay off every existing lien. Your cash is what remains after the payoff and closing costs. The county loan limit can cut the amount further, and you must have owned and lived in the home for 12 months. Everything here is subject to lender guidelines and full file review, and none of it is a commitment to lend.

What FHA Cash-Out Means on a Duplex

An FHA cash-out refinance replaces your current mortgage with a new FHA-insured loan that is larger than your payoff. You keep the difference as cash. The loan is insured by the Federal Housing Administration, so lenders can accept more flexible credit than many conventional programs.

On a duplex, the home must be your principal residence. You live in one unit and rent the other, or you use both. If you have already moved out and rent both units, this program is off the table. Occupancy decides the leverage, so a rental or second home doesn’t qualify for standard cash-out.

Across the wholesale programs Lendmire places FHA loans with, the rules for a duplex match a single-family home on the big questions. This article goes deeper on the two-unit case.

What FHA Cash-Out Lends on a Duplex: The Leverage Cap

The cash-out cap is 80% of the appraised value. That applies to the loan on its own and to your combined debt if a second lien is involved. HUD reduced the cash-out cap to 80% of adjusted value in Mortgagee Letter 2019-11, after earlier, higher limits. If you read online that FHA cash-out goes much higher, that information is out of date.

Compare that with FHA’s other refinance paths. The ceilings are very different:

The Streamline refinances an existing FHA loan with a limited credit review and a net tangible benefit. The rate-and-term loan changes your loan terms without giving you cash. If you don’t need cash, one of those may fit better. The 80% cap is the price of taking equity out.

How the Underwriting Works, Step by Step

Here is how a duplex file moves from application to cash.

1. Case number and the 12-month clock. The lender orders an FHA case number. At least one borrower must have owned the home and lived in it as a principal residence for the 12 months before that date, as HUD’s cash-out rules are reproduced by a compliance reference site. That site is secondary, so lenders confirm the wording against HUD.

2. Appraisal. The appraiser values the whole building. On a two-unit home the report also estimates market rent for the units. The appraised value sets your 80% ceiling.

3. Payoff. The new loan pays off your first mortgage and any second lien or HELOC. Combined debt can’t exceed the cap, so a HELOC has to be paid off or counted.

4. Upfront premium. FHA charges an upfront mortgage insurance premium of 1.75% of the base loan. HUD’s Mortgagee Letter 2023-05 applies it to FHA mortgages generally, and cash-out isn’t among the listed exceptions. It is financed, meaning added to your balance.

5. Underwriting. The lender reviews credit, payment history, income and debt ratios. The full new payment goes into your debt ratio, and part of the second unit’s rent can count as income.

6. Cash. After the payoff, closing costs and prepaid items, what remains is yours.

Credit and ratios

The wholesale programs Lendmire works with start at a 580 decision score. Lenders may set their own higher floors. The base debt ratios are 31/43 (housing to total) with no compensating factors. Documented compensating factors, such as savings or a long job history, can raise those limits, and at the top credit tier they can reach 40/50. The automated finding governs most files. HUD also sets waiting periods after credit events: two years from a Chapter 7 discharge and three years from a foreclosure.

A Worked Duplex Example, in Percentages

Think in percentages of value rather than dollars. Suppose the appraisal comes in at 100% (the full value of the building). Your current first mortgage is 55% of that value, with no second lien.

The 25% is a ceiling, not a payout. Closing costs and prepaid items come out of it, so the cash in your hand is lower. The upfront premium raises your balance but doesn’t reduce your cash. This is why an “80% loan” can show a balance slightly above 80% of value after the premium is financed. Lenders confirm exactly how the premium is added.

Now run a second case, for a home you have owned and lived in for at least 12 months. Your first mortgage is 65% and you have a HELOC at 10%. Together that’s 75%. The 80% cap leaves a margin of 5% before costs. After closing costs, you may net little. A duplex you have refinanced recently may leave almost nothing for the same reason.

When the County Loan Limit Binds First

The loan is the lower of 80% of value and your county’s FHA loan limit. County loan limits apply, and they change every January. HUD sets the two-unit limits in a yearly letter, with a national floor and a high-cost ceiling tied to the conforming loan limit. Two-unit limits sit above one-unit limits.

In lower-cost areas, the limit can sit under 80% of a pricey duplex’s value. In expensive markets the reverse can happen. Ask your loan officer to look up your county before you count on a number. This page doesn’t quote dollar limits because they depend on your county and change annually.

How the Second Unit’s Rent Counts

The rent from the unit you rent out can help you qualify, but only a share of it counts. The rest is held back as a cushion against vacancy and upkeep. The lender doesn’t count the rent for the unit you live in, because you don’t collect it.

Where there is no rent history on the property, lenders use the appraiser’s market rent or a signed lease. HUD’s rental income policy letter, Mortgagee Letter 2023-17, lists those as documentation sources. Where you have a rent history, ask your loan officer which documents the lender will want to see.

The practical effect: a low appraised rent shrinks your qualifying income. If your unit is renting under market, the appraiser may report a figure you didn’t expect. A fair, signed lease helps.

Where the General Rule Breaks

Some situations change the answer on a duplex.

• Owned under 12 months. Standard cash-out isn’t available until the 12-month own-and-occupy test is met. Some lenders also tighten leverage on a newer owner.
• Moved out. If you now rent both units, the home is an investment property, and the program doesn’t apply.
• Three or four units. Those homes add a self-sufficiency test, where the rent from all units has to cover the full payment. A duplex is exempt. That is one reason a two-unit home is easier than a fourplex.
• Second liens. A HELOC or second mortgage must be paid off or fit under the combined cap. If you skip this step, your cash estimate will be too high.
• Low appraisal. Because 80% applies to appraised value, a soft appraisal reduces the cash dollar for dollar at the cap.

What Could Shrink Your Cash

Several factors can trim the check:

• A first mortgage that is already close to 80% of value.
• A HELOC or second lien that eats into the cap.
• A conservative appraisal.
• Closing costs and prepaid items taken out of the proceeds.
• An annual mortgage insurance premium (between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV) that raises the monthly cost for as long as it lasts. On a thirty-year loan above 90% LTV it lasts the term. At or below 90% it ends after eleven years. Because the premium is charged on the whole new loan, taking more cash out increases it.
• A county loan limit lower than 80% of value. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.

One wrinkle affects the cap itself. Because the 1.75% upfront premium is financed on top of the 80% base loan, your equity after closing can land slightly below 20% of value.

What Your Decision Looks Like in Practice

Start by asking whether you need the cash and whether another path gets you there. If you only want a different term or a lower balance cost, the Streamline or rate-and-term refinance may fit, and neither uses the 80% cap. If you do need cash, compare the total cost of the new loan, including the financed premium and the annual premium, against the use of the money.

Before applying, gather your current mortgage statement, any HELOC statement, your insurance declaration, two years of income documents, and a lease for the rented unit. Then ask for a Loan Estimate and read the costs line by line. You can compare offers, because the Loan Estimate shows the same items in the same places.

Key Terms Defined

Cash-out refinance: A new mortgage larger than your payoff, where you receive the difference in cash.

LTV (loan-to-value): The loan amount divided by the home’s appraised value, shown as a percentage.

CLTV (combined loan-to-value): All loans on the home, including a second lien, divided by value.

Base loan: The loan amount before the financed upfront premium is added.

Seasoning: The waiting period you must meet, here 12 months of owning and living in the home.

Principal residence: The home where you live most of the year.

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.

For your own numbers, request a scenario review with Lendmire.

About Lendmire

Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. HUD Mortgagee Letter 2019-11

2. claudeforcompliance.com

3. HUD Mortgagee Letter 2023-05

4. HUD Mortgagee Letter 2025-23 (FHA loan limits)

5. HUD Mortgagee Letter 2023-17