The Quick Read: It depends on your home’s equity, not the size of the bill. The new loan tops out at 80% of the appraised value, and you keep what is left after the old mortgage, any other liens, and closing costs are paid. A bill that fits inside that leftover amount can be covered. A bigger one cannot.
How Is the Cash Calculated?
The cash is the new loan minus everything the new loan has to pay off. The lender does not start with your bill. It starts with the appraised value of your home.
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 formula in plain terms:
Maximum new loan = 80% of the appraised value (and within the county loan limit)
Cash to you = maximum new loan, minus the payoff of your current mortgage, minus the payoff of any other liens, minus closing costs and prepaid items paid from the proceeds.
Three things shape the answer: the appraised value, what you still owe, and the costs of the new loan. County loan limits apply too, and they change every year. On higher-priced homes, the limit can stop the loan before 80% does.
Your own estimate of the home’s value does not count. The appraiser’s number does. If the appraisal comes in lower than you expected, the cash shrinks with it.
A Worked Example
Say your home appraises at 100% of its value, and your current mortgage balance equals 55% of that value. Run the math this way, using modeled assumptions rather than market data:
- Maximum new loan: 80% of value.
- Payoff of the current mortgage: 55% of value.
- Gross cash before costs: 25% of value.
- Closing costs and prepaid items come out of that 25%, so the net is smaller.
| Line item | What happens |
|---|---|
| New loan (80% cap) | Sets the ceiling |
| Current mortgage payoff | Subtracted first |
| Other liens | Subtracted next |
| Closing costs and prepaids | Subtracted from proceeds |
| Net cash to you | What remains |
Now two cases. In the first, your medical bill is well under that 25% slice. The cash covers it, and the leftover stays in your pocket. Take only what you need, because every extra point of cash becomes a larger loan balance you repay.
In the second, the bill is bigger than the net cash. No amount of paperwork changes that. The cap is the cap. You would need another way to cover the gap, such as a payment plan on the remainder.
If your balance is closer to 75% of value, the gross cash is only about 5% of value before costs. Costs can eat most of that. Run the equity math before you plan around this loan.
Can You Use the Money for a Medical Bill?
Yes. A cash-out refinance is not limited to specific purposes. You decide what to pay with the cash, and the lender is not underwriting your bill. The lender is underwriting your equity, your credit, and your capacity to repay the new loan.
That works in your favor and against you. You do not need to prove the bill to get the money. But the lender also will not care whether the bill was legitimate, inflated, or negotiable. That job is yours.
Before you borrow, get an itemized statement and ask the provider about financial assistance. Many hospitals have assistance or payment-plan programs. Check whether the bill is even correct. A reduced bill means a smaller loan, and a smaller loan is the cheaper one.
What Takes a Bite Out of Your Net Cash?
Two things shrink the payout beyond your existing mortgage: closing costs and FHA mortgage insurance.
Every FHA loan carries an upfront premium of 1.75% of the base loan, and it is financed into the loan. You usually do not pay it at the table. It raises the balance you owe and shows up on your Loan Estimate, so ask your loan officer exactly how it sits against the 80% cap on your file.
There is also an annual premium, billed monthly. Across the wholesale programs Lendmire places FHA loans with, it falls between 0.15% and 0.75% of the balance, depending on the term, the loan amount, and the LTV. LTV, or loan-to-value, is the loan balance divided by the home’s value. On a thirty-year loan at or below 90% LTV, the annual premium ends after eleven years. A cash-out sits at 80% at most, so that shorter schedule typically applies. Above 90% LTV, it lasts the full term.
Mortgage insurance is not optional on FHA, even with 20% equity. That is different from conventional loans, where insurance usually falls away around that point. Your Loan Estimate and Closing Disclosure show every cost line by line.
Who Qualifies for an FHA Cash-Out Refinance?
You qualify by owning and living in the home, by paying on time, and by passing a full review. Across the programs we work with, these are the main tests:
- Occupancy and ownership. The home must be your principal residence. The FHA cash-out reaches 80% LTV on a home you have owned and lived in for 12 months before the case number is assigned. A second home or rental does not fit this program.
- Credit. The wholesale programs Lendmire places FHA loans with start at a 580 decision score. HUD has a lower tier on paper, but the network does not reach below 580. Some lenders set a higher floor.
- Debt ratios. The base pair is 31/43, with no compensating factors. That means housing costs at 31% of income and total debts at 43%. Documented compensating factors can stretch the pair to 40/50 at the top tier. The automated finding governs most files.
- Payment history. Lenders review how you have paid your current mortgage. Recent late payments can block a cash-out, even when you have plenty of equity.
- Income. Your qualifying income is generally the income of borrowers who live in the home. A co-signer who does not live there may not help on a cash-out.
- Appraisal. An FHA appraisal sets the value. This is a new, fully underwritten loan.
Everything above is subject to lender guidelines and full file review. Nothing here is a commitment to lend.
Other FHA refinances do not put cash in your hands. The Streamline refinance replaces an existing FHA loan with no appraisal and a limited credit review. It is built to lower cost or improve terms, not to raise cash. It will not fund a medical bill.
Why Is the Cap 80%?
The cap is lower than it once was because FHA reduced the maximum. HUD Mortgagee Letter 2019-11 set the maximum loan-to-value and combined loan-to-value for FHA cash-out refinances at 80%. HUD said the change aligned FHA with the maximum used for conventional cash-out loans.
Combined loan-to-value means your first mortgage plus any other loans on the home, measured against value. So a second mortgage you keep counts toward the cap.
Plenty of people still believe the cap is 85%. That was the old number. Plenty also believe they can borrow all their equity. They cannot. The CFPB’s guide to using home equity notes that lenders typically want you to keep 10% to 20% of your home’s value as equity. FHA’s cap leaves you 20%.
Is It Fast Enough for a Bill Due Soon?
Not reliably, and a true emergency is a poor fit. A cash-out needs a case number, an appraisal, full underwriting, and closing. On a primary residence, a right-of-rescission waiting period also applies before funds are released. That is a short window after closing that lets you cancel the loan.
So this is a planning tool. If a bill is due soon, call the provider first. Ask for time, a payment plan, or a hold on collections. Do not count on the loan to land by a specific date.
What Do You Risk by Borrowing Against Your Home?
You risk turning an unsecured bill into a debt your house stands behind. A medical bill is usually unsecured. If you cannot pay it, the provider can send it to collections, and that hurts your credit. Roll it into your mortgage, and a missed payment puts your home at risk.
The CFPB’s guide also warns that a cash-out may extend the time to pay off your mortgage, and your monthly payment may rise because you replace your current mortgage with a larger loan. Remember that a cash-out replaces your whole first mortgage. A home equity loan or line of credit leaves it in place.
Here is the honest tradeoff. If your current mortgage terms are strong, replacing them to pay one bill may cost you more than it saves. If your current mortgage is already expensive for you, the swap hurts less. Stress-test the new payment against your budget before you commit, not after.
What about credit? Medical collections can still show up on credit reports. A federal rule that would have removed medical bills from credit reports was vacated by a court. The Congressional Research Service reports that the three credit bureaus have voluntarily removed an estimated 70% of outstanding medical debt. Policies and state laws vary, so check what is on your own reports.
What Are the Alternatives?
| Option | How it works | Fits when |
|---|---|---|
| Hospital financial assistance | May reduce or cancel the bill | Income is limited |
| Provider payment plan | Spreads the bill over time | The bill is manageable |
| Home equity loan or HELOC | Keeps your first mortgage in place | Your current mortgage is worth keeping |
| Personal loan | Unsecured, no lien on your home | You want the house kept out of it |
| FHA cash-out refinance | Replaces your whole mortgage | You have equity and can handle a bigger loan |
Cheaper options exist for many people, and they are worth trying first. The CFPB also points homeowners toward nonprofit credit counseling before putting a home at risk. A cash-out fits best when the bill is large, the other options fall short, and you have real equity above that 80% line.
What Should You Do Before You Apply?
1. Get the itemized bill and ask about financial assistance or a payment plan. 2. Pull your mortgage statement for the exact payoff balance. 3. Estimate your home’s value, knowing the appraisal decides it. 4. Confirm you have owned and lived in the home for at least 12 months. 5. Check your mortgage payment history for late payments. 6. Ask for a Loan Estimate and compare the net cash against the full cost of the new loan.
If future medical costs are uncertain, resist borrowing a big cushion. Extra cash means a bigger balance, and you repay it with interest for years.
Key Terms Defined
Cash-out refinance: a new mortgage that pays off your old one and gives you the difference in cash.
Appraised value: the value a licensed appraiser assigns to your home. It sets the 80% cap.
LTV (loan-to-value): your loan balance divided by your home’s value.
Combined LTV: all loans on the home added together, divided by its value.
Upfront premium: the one-time FHA mortgage insurance charge, financed into the loan.
DTI (debt-to-income): your monthly debts divided by your monthly income.
Rescission period: a short window after closing on a primary residence when you can cancel the loan before funds are released.
Weighing It Against Keeping the Loan You Have
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 the size of my medical bill change how much cash I get?
No. Equity, your existing payoff, other liens, closing costs, the county loan limit, and your credit and income set the number. A bigger bill does not raise the cap, and a smaller bill does not lower what you are allowed to borrow. You can take less than the maximum if that is all you need.
Can I get 100% of my equity out?
No. The FHA cash-out cap is 80% of the appraised value, so at least 20% stays in the home. Costs and mortgage insurance trim the net further. If you owe more than about 80% of the value today, there may be no cash left after the payoff.
Will the lender pay my hospital directly?
That depends on how the closing is arranged, and it is not a requirement. The proceeds are not tied to a specific purpose, so most borrowers receive the cash and pay the provider themselves. Ask your loan officer whether a direct payment can be set up on your file.
Can I use a Streamline refinance to cover a bill?
No. The FHA Streamline replaces an existing FHA loan with no appraisal and a limited credit review. It does not release equity as cash. For cash, you need the cash-out program.
Is a cash-out refinance a good way to pay medical debt?
Sometimes, but not often as a first move. It turns unsecured debt into debt backed by your home and replaces your entire mortgage. Try payment plans, financial assistance, and bill negotiation first. Consider the cash-out when the bill is large and your equity is solid.
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.
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References
1. HUD Mortgagee Letter 2019-11
2. HUD press release on cash-out refinance risk
3. CFPB: Using home equity to meet financial needs
4. CFPB medical debt rule page
5. Congressional Research Service: Medical Debt overview
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 Cover a Medical Bill · How to Get Through the Appraisal on an FHA Cash-Out Refinance · How to Get an FHA Cash-Out When Conventional Costs Too Much
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.