How Much Cash Comes Out of an FHA Cash-Out Refinance Before the Appraisal Sets Value?

The Quick Read: Not directly, because no firm dollar amount exists until the appraisal sets your home’s value. FHA caps the new loan at 80% of that value. Your old mortgage payoff and any financed costs come out of the cap, and what is left is your cash. Before the appraisal, every number you see is an estimate.

The Formula in One Line

Your cash is roughly 80% of the home’s value, minus what you owe, minus the costs rolled into the new loan.

That is the whole mechanism. Three inputs drive it: value, payoff, and financed costs. You know your payoff fairly well. You can estimate the costs. The value is the piece you do not control, and it is the piece with the most leverage over your result.

Here is the catch. The 80% limit applies to the value the appraiser supports, not the value you believe, and not an online estimate. A home you picture at one number can come back at another. Because the cap is a fixed percentage of value, a small miss in value turns into a larger miss in cash.

Why Nothing Is Firm Before the Appraisal

A cash-out refinance replaces your current mortgage with a new, larger one. The new loan pays off the old one first. Anything left after payoff and costs goes to you.

The size of the new loan depends on value. Value comes from an appraisal ordered through the FHA process. Until that report exists, a lender can only work from your estimate. A loan officer who quotes you a firm cash figure before the appraisal is guessing, or is showing you a best case.

The short version of how Lendmire works is that it is a mortgage broker. It arranges these loans through wholesale lenders, and the lender reviews the file and sets the final terms. Every figure here is subject to lender guidelines and full file review, and none of it is a commitment to lend.

One more point on value. The appraised figure can be adjusted under FHA’s rules before the 80% test runs. The test runs against that adjusted value, which can differ from the raw number on the report. Your loan officer will tell you which figure is being used once the report arrives.

Run Your Own Pre-Appraisal Estimate

You can build a decent estimate in four steps. Use ranges, not a single number.

1. Pick a value range. Use recent sales of similar homes near you, not a listing price or a website estimate. Choose a realistic figure and a cautious one.

2. Take 80% of each. That is your loan ceiling at each value.

3. Subtract your payoff. Use the balance on your statement, plus interest owed to the payoff date. Subtract any second lien too, since it must be paid or counted against the cap.

4. Subtract financed costs. Include the upfront mortgage insurance premium, appraisal and title charges, and lender and settlement costs that you roll in.

The result at your cautious value is the number to plan around. The result at your realistic value is the number to hope for.

Now the premium. FHA charges an upfront mortgage insurance premium of 1.75% of the base loan, and borrowers typically finance it. It rides inside the loan, so it reduces your cash like any other cost. There is also an annual premium, billed monthly with the payment. Across the programs Lendmire places, that 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 the program’s LTV threshold for early cancellation, it ends after eleven years, and a cash-out at the 80% cap sits below that line. These are program mechanics, not a price quote.

What Happens to Your Cash if Value Comes In Low?

Cash falls faster than value does. The cap moves by 80 cents for every dollar of lost value, but your payoff does not move at all. The entire loss comes out of your cash.

Run the numbers on a hypothetical home. Say the expected value is 100 units, you owe 60 units, and financed costs and premium total 5 units. These figures are illustrative only.

A 5% miss on value cuts the cash by about a quarter, from 15 to 11. A 10% miss cuts it by more than half, from 15 to 7. The higher your payoff is relative to value, the more brutal this gets. A homeowner who owes close to the cap has almost no cushion. A small miss can erase the cash entirely.

(That is why a cash figure quoted before the appraisal deserves a healthy dose of skepticism.)

What Comes Out Before You See Money

Four things come out of the capped loan ahead of you:

• Your current first mortgage. It gets paid in full.
• Other liens. A second mortgage or home equity line that stays in place counts against the same 80% limit. Most borrowers pay it off.
• Financed costs. Appraisal, title, lender and settlement charges, and prepaid items rolled into the loan shrink your cash dollar for dollar.
• The financed upfront premium. It sits inside the loan, as covered above.

CFPB research on cash-out refinances notes that closing costs on these loans can be substantial, and that borrowers often use part of their proceeds to cover them. Treat that as a planning point. If you need a specific amount for a project, ask for an estimate of net cash after costs, not the maximum loan.

County loan limits also apply. FHA sets them by county and revises them every year. In some high-priced areas, the limit can cap the loan before 80% of value does. Your loan officer will check your county’s current limit.

Credit and debt-to-income review still happen. The base ratio pair is 31/43 (housing costs and total debts as a share of income). Documented compensating factors can raise those limits, and the lender’s automated underwriting finding, together with full file review, determines what your file can support. A strong appraisal does not override a weak ratio.

Who Can Use FHA Cash-Out at All?

FHA cash-out is for the home you live in. Occupancy decides the leverage here, so a second home or a property you rent out does not qualify for this version.

Across the wholesale programs Lendmire places, the FHA cash-out is capped at 80% LTV on a home you have owned and occupied for 12 months before the case number is assigned. The case number is the FHA identifier assigned to your file, and the twelve months count back from that date. Lenders also review your payment history on the current loan. Exceptions exist for situations like inheritance, divorce, or buying out a co-owner. Ask about your situation, because the details depend on lender guidelines.

What about a home with no mortgage? A new loan on a paid-off home still counts as a cash-out. The same 80% cap applies, and nearly all of the loan can come to you, less costs. Credit events follow HUD’s waiting periods: two years from a Chapter 7 discharge and three years from a foreclosure. Those are HUD’s rules, not a promise from any lender.

Why 80%? A Short History

FHA lowered the cash-out cap to 80% of adjusted value in HUD Mortgagee Letter 2019-11. The same cap applies to combined loan-to-value, so any second lien counts toward it. The earlier limit was 85%, and before that it was 95%. Some older guides still print 85%, and that figure is out of date.

HUD’s announcement framed the change as reducing risk from cash-out lending and preserving homeowner equity. It also lined FHA up with the cap used by Fannie Mae and Freddie Mac. One practical result: at least 20% of your home’s value stays as equity after closing. You cannot pull out all of your equity.

The 80% cap does not apply to Hawaiian Home Lands loans, which follow a separate FHA section. That is a narrow exception most borrowers will not meet.

Cash-Out, Rate-and-Term, or Streamline?

These three FHA refinances serve different goals. Only one puts cash in your hand.

The rate-and-term refinance, which does use an appraisal, reaches 97.75% on a principal residence. It changes your loan terms without paying you. The Streamline refinances an existing FHA loan with no appraisal, a limited credit review, and a net tangible benefit. It also pays no cash. If you want money out, the cash-out is the only FHA choice of the three.

If the Appraisal Comes in Low

You have a few paths. You can ask the lender to review the report when you have comparable sales the appraiser may have missed. You can take a smaller cash-out. You can wait and revisit when values or your payoff change. Or you can decide the refinance no longer makes sense, which is a perfectly good outcome.

Plan any project budget around your cautious number. If a roof or a kitchen costs more than the cash you would net at a 10% lower value, line up a fallback before you commit. Remember too that the final cash shows up on your Closing Disclosure. It can differ from the early Loan Estimate, because the appraisal and costs settle in between.

Key Terms Defined

Appraised value: the dollar opinion of your home’s worth from a licensed appraiser, based on comparable recent sales and the home’s condition.

Adjusted value: the appraised figure after FHA’s rules are applied. The 80% test runs against this number.

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

Combined loan-to-value (CLTV): the same measure with every loan on the home counted, including a second lien.

Payoff: the amount needed to retire your current mortgage on the closing date, including interest owed.

Upfront mortgage insurance premium: a one-time FHA charge of 1.75% of the base loan, usually financed into the loan.

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. Bring a cautious value and your payoff, and the numbers get much more useful.

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

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.

References

1. CFPB, Cash-Out Refinances and Paydown Behavior of Non-Mortgage Debt Balances

2. HUD Mortgagee Letter 2019-11

3. HUD press release 19-114