The Quick Read: It depends on your equity, not on any repair bid. The loan can reach 80% of your home’s appraised value, and your cash is what is left after your current mortgage, closing costs and the financed insurance premium. You do not need a contractor, a bid or a repair budget to receive it, though an appraiser can still require certain fixes before closing.
The Formula: How the Cash Gets Calculated
The cash you receive is a subtraction problem. Start with the appraised value, take 80% of it, and subtract everything the new loan has to pay off or cover. What is left is yours to spend.
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.
Here is the repairs-specific version, step by step:
1. Appraised value times 80%. This is the largest total loan the program allows on a home you have owned and lived in for 12 months before the case number is assigned.
2. Subtract your current first mortgage payoff. The new loan replaces it.
3. Subtract any other liens that must be paid. A second mortgage or a HELOC counts toward the cap, so it gets paid off or counted.
4. Subtract closing costs and prepaids. This is a full refinance, so the usual costs apply.
5. Account for the upfront mortgage insurance premium. It is 1.75% of the base loan, and most borrowers finance it. That adds to the balance.
What remains is the cash you can use for repairs. The formula never asks what the repairs cost. A $4,000 fix and a $40,000 project produce the same cash if your equity is the same.
Because the financed premium is added on top of the capped base loan, it is not limited by the 80% test, which applies only to the base loan. Lenders lay out each of these lines item by item, and you will see them on your Loan Estimate.
What Does the Math Look Like at Different Equity Levels?
The cash swings widely with equity. These are modeled assumptions expressed as a percentage of the home’s appraised value, not market data, and they ignore closing costs and the premium.
| Current mortgage (% of value) | Maximum new loan | Cash before costs |
|---|---|---|
| 50% | 80% | About 30% of value |
| 65% | 80% | About 15% of value |
| 78% | 80% | About 2% of value |
| Above 80% | Cap blocks it | None |
Look at the third row. A homeowner at 78% has equity on paper but almost no cash after the costs of a full refinance. The cash can end up below what the repairs need.
The reverse also happens. A homeowner with a paid-down loan can pull out far more than a small repair requires. That surplus is new debt, whether or not you spend it.
Do You Need a Contractor?
No, With One Catch
An FHA cash-out refinance does not tie your proceeds to a purpose. The cash is paid out to you rather than held back for a particular job. Nobody tracks whether it goes to a roof, a kitchen, a debt or a savings account.
That is what separates it from a rehab loan, where the repair money sits in escrow and is released in stages. With cash-out, you skip the bids and the draw schedule. You also skip the oversight.
Here is the catch. “No contractor” describes the loan, not the appraisal. The FHA appraiser sets the value, and that value drives your 80% cap. The appraiser also flags health, safety and soundness problems. Think a failing roof, exposed wiring or peeling paint on an older home.
If the appraisal conditions the loan on those items, they may have to be fixed or escrowed before closing, and proof of completion may be requested. The cash-out proceeds can still pay for them. The exact requirement depends on what the appraiser finds and on the lender’s reading of it.
Cosmetic wants are different. A dated bathroom or worn flooring does not need to be fixed to close.
How a Needed Repair Can Change the Cash
Condition feeds value, and value feeds cash. A home with deferred maintenance can appraise lower than a similar home in good shape. A lower value shrinks the 80% cap and the cash with it.
That creates an awkward loop for repair borrowers. The work you want funded is the work that may be holding the appraisal down. Do not assume the appraisal will reflect the finished home. It reflects the home as the appraiser sees it.
If your repairs are modest, the loop rarely matters. If the home needs major work, ask your loan officer whether a rehab loan fits better, since that product sizes the loan on the value after improvements.
Cash-Out vs. a 203(k) Rehab Loan
Both products fund repairs. They work in opposite ways.
| Factor | FHA cash-out | 203(k) rehab |
|---|---|---|
| Cash to you | Yes, at closing | No, held in escrow |
| Contractor required | No | Typically yes |
| Doing the work yourself | Your choice | Tightly limited |
| Loan sized on | Current value, 80% cap | Value after improvements |
| Oversight | None | Draws and inspections |
HUD’s 203(k) program page describes two versions. The Limited 203(k) covers minor, non-structural repairs and finances up to $75,000 in rehabilitation costs. The Standard 203(k) is for larger remodeling and structural work and has a $5,000 minimum repair cost.
The consultant rule is where borrowers get confused. Per HUD’s 203(k) overview, the Standard version requires a 203(k) Consultant and the Limited does not. HUD also reviews the Limited cap annually, so confirm the current number before you plan around it.
Your choice usually comes down to scope. Small-to-medium repairs on a home with plenty of equity favor cash-out. Big structural work, or a home with thin equity, favors a rehab loan.
What Comes Out of Your Proceeds
Four things reduce the check you receive.
- Your old mortgage. It is paid off first.
- Other liens. Second mortgages and HELOCs count toward the cap.
- Closing costs and prepaids. These are the usual refinance costs, itemized on your Loan Estimate and Closing Disclosure.
- Mortgage insurance. The upfront premium is 1.75% of the base loan, and it is commonly financed. 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 above 90% LTV it lasts for the term. At or below 90%, it ends after eleven years.
Those premiums are program mechanics, not a price quote. Because cash-out loans sit at up to 80% LTV, the 90% line matters less here than on a purchase. Your loan officer will show which side your file falls on. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
County loan limits also cap the loan. They are set by county and change every year, so they vary where you live.
Who Qualifies
Eligibility has four pieces.
- Occupancy and seasoning. The home must be your principal residence, owned and occupied for 12 months before the case number. Investment properties are not eligible for FHA financing.
- Payment history. Recent mortgage lates can disqualify a cash-out file. Lenders look closely at the past 12 months.
- Credit. Minimum scores are set by the lender, and many set their own floors above the government’s minimum. Ask early.
- Debt-to-income. The base pair is 31/43 (housing and total debt as a share of income). Documented compensating factors can stretch that toward 40/50 at the top tier. An automated underwriting finding governs most files.
Everything above is subject to lender guidelines and full file review. Nothing here is a commitment to lend.
Doing the Work Yourself: Budget Like a Contractor Would
A lump sum with no oversight moves all the project management to you. You scope the work, price it and judge the quality. A contractor normally handles those things, and so does a draw schedule on a rehab loan.
Here is a practical checklist.
- Write a scope before you apply. Know what you are fixing and in what order.
- Price materials and labor separately. Get at least two quotes for anything you will not do yourself.
- Add permits and inspections. Skipping them can cause trouble when you sell or insure.
- Hold a contingency. Older homes surprise people, and a reserve keeps a surprise from becoming new debt.
- Park the cash in a separate account. It keeps repair money from drifting into everyday spending.
- Keep every receipt. You will want a record of what the money did.
Unlicensed help carries risk the loan does not cover. If work goes badly, nobody inspects it for you and no escrow holds back payment.
Doing repairs before or after closing is your call, with one exception. Anything the appraiser requires comes first.
Why You’ll See Older Numbers Online
Search results are full of stale figures. FHA’s cash-out cap was once 85%. HUD’s knowledge base confirms it was lowered to 80% for case numbers assigned after a 2019 change, and that the first mortgage plus any subordinate liens must fit under the limit. Use 80%.
Similar confusion surrounds the rate-and-term refinance. The FHA rate-and-term refinance with an appraisal reaches 97.75% on a principal residence occupied for the previous twelve months. It returns no cash for repairs. Take cash out and you move to the 80% cap.
The FHA Streamline is different again. It refinances an existing FHA loan with no appraisal and a limited credit review, and it requires a net tangible benefit. It also pays out no cash.
Is a Small Cash-Out Worth It?
A cash-out refinance replaces your whole mortgage. That means new closing costs, a new insurance premium and a reset term, all to reach a modest amount of cash.
CFPB’s guide on using home equity notes that a cash-out refinance can extend your payoff time and raise your monthly payment, since a larger loan replaces the current one. The effect is sharpest if your existing loan has a low balance and favorable terms. You trade that for a bigger, longer loan.
CFPB also reports that more than half of cash-out borrowers in each year from 2014 to 2019 cited paying off other bills or debts as a reason. Repairs are only one use. If you spend the cash on something else, you still owe it back.
Some questions to ask yourself:
- Will the repairs protect or add to the home’s value?
- Is my current loan already inexpensive to keep?
- Would a smaller loan, a savings plan or a rehab product fit the job better?
- Can I carry the higher payment with room to spare?
A small project on a thin equity cushion often does not justify a full refinance. That is an honest answer, and it is sometimes the right one.
Key Terms Defined
Adjusted value: The appraised value FHA uses to set your maximum loan.
LTV (loan-to-value): Your loan balance divided by the home’s value, shown as a percentage.
Upfront mortgage insurance premium: A one-time FHA charge of 1.75% of the base loan, usually financed into the balance.
Annual mortgage insurance premium: A yearly FHA charge, paid monthly, based on term, loan amount and LTV.
Seasoning: The waiting period before you qualify, here 12 months of owning and living in the home.
203(k): An FHA rehab loan where repair money is held in escrow and released as work is completed.
Who This Fits (and Who It Doesn’t)
FHA cash-out fits a homeowner who has lived in the home for at least a year, has solid equity, and wants flexibility on how repairs get done. It also suits someone whose credit or debt ratio does not fit other programs.
It fits poorly for thin equity, for projects that change the home’s structure, and for homeowners already holding an inexpensive loan.
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. You can also reach the team at 828-256-2183.
Frequently Asked Questions
Can I use FHA cash-out money for repairs without hiring a contractor?
Yes. The proceeds are not restricted to specific purposes, so you can do the work yourself or hire anyone you choose. One exception applies: repairs the appraiser requires may need to be completed or escrowed before closing. Beyond that, you manage the project and carry the risk.
Is the cash limited to what my repairs cost?
No. The cash is set by your equity and the 80% cap, not by a repair estimate. It can fall short of your repair need if equity is thin, or exceed it if equity is large. Anything you do not spend is still part of the new loan.
Does a rehab loan ever pay me cash?
No. A 203(k) holds repair money in escrow and releases it as work is finished. That control is the trade-off for sizing the loan on the value after improvements. If you want cash in hand and freedom over how it is used, cash-out is the product built for that.
What equity do I have to keep in the home?
At least 20%, because the combined first mortgage and any other liens cannot exceed 80% of the appraised value. Closing costs and the financed premium shrink your available cash further, so the usable amount is smaller than the raw equity figure.
Do appraisal repairs change my cash?
Yes, they can. The appraiser sets the value, and a home in poor condition may appraise lower, which reduces the 80% cap. Required safety or soundness repairs may also have to be addressed before closing. Cosmetic updates you want are not required to close.
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.
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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 – 203(k) Rehabilitation Program Types
2. HUD Answers – What is the 203(k) Rehabilitation Mortgage Insurance Program
3. CFPB – Using Home Equity guide
4. CFPB – Cash-Out Refinance Borrowers newsroom item
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 Plan and Use an FHA Cash-Out Refinance to Go Fixed · How to Qualify and Apply for an FHA Cash-Out Refinance After 12 Months · How Lenders Underwrite an FHA Cash-Out Refinance Versus Limited Cash-Out Refinance
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.