How Much Cash Comes Out of an FHA Cash-Out Refinance to Go Fixed?

The Quick Read: Usually a lot less than 80% of your home’s value. That 80% is the ceiling on the whole new loan, not the size of your check. Your cash is what remains after the old mortgage, any other liens, financed insurance and closing costs come out of that capped amount. Going to a fixed rate is your goal, not an FHA rule, so it does not change the cash formula.

The Formula in One Line

The formula runs in five steps, each one taken out of the capped loan amount:

• Start with 80% of the adjusted value (usually the appraised value).
• Subtract the payoff of your current first mortgage.
• Subtract any other liens being paid off, such as a second mortgage or HELOC.
• Subtract closing costs and prepaids paid from proceeds.
• Subtract the financed upfront mortgage insurance premium, which is 1.75% of the base loan. It is paid from within the same 80% cap, so it is not added on top.

Whatever is left is yours. The other 20% of the home’s value is never borrowed, so it stays as equity. The rest of this article shows how the numbers move.

Does “Going Fixed” Change the Cash Amount?

No. Rate type does not enter the formula at all, because the limit is set against the home’s value.

Here is where the goal does matter. People who want to go fixed are often paying off variable-rate debt, such as an adjustable mortgage or a home equity line. That debt is part of the payoff, so a bigger payoff means a smaller check. A borrower with a large HELOC balance may find that most of the 80% is spoken for before any cash appears.

No agency figure compares cash amounts for fixed and adjustable outcomes, so be wary of anyone who claims one exists. The honest comparison is about what you want the payment to do over time, not about how much cash you receive.

A Worked Example

Treat these inputs as modeled assumptions, not market data. Suppose the appraisal sets the home’s adjusted value at 100%, and every other figure is a share of that value. The new loan, including the financed premium, can reach 80%. The current mortgage payoff is 60% of value. Assume closing costs and prepaids run 3% of value. The financed upfront premium is 1.75% of the base loan, which works out to roughly 1.4% of value, and it is paid out of that same 80%.

The result: 80, minus 60, minus 3, minus about 1.4, leaves roughly 15.6% of the home’s value in cash. That is under a fifth of the value, not four-fifths. A different payoff changes everything, as the next table shows. The rows are rounded, and the premium shifts slightly with the size of the base loan.

Look closely at the last row. With a payoff near 75% of value, costs and insurance can consume the whole gap. In that case a cash-out refinance produces almost nothing, and a different tool may fit better.

What Shrinks Your Check

Five items reduce the cash, and you can see most of them before you commit:

• The payoff itself. The larger your balance, the smaller the check.
• Other liens. A second mortgage or HELOC paid at closing comes out of the same capped amount.
• The upfront premium. The 1.75% premium is financed into the new loan, and the 80% cap counts the whole new loan, so the premium comes out of the same capped amount.
• Closing costs and prepaids. These come out of the same capped loan unless you pay them out of pocket.
• A low appraisal. The 80% applies to the appraised value, so a lower figure shrinks the cap and the check along with it.

Paying costs out of pocket raises your cash received, but it means bringing money to closing. That tradeoff belongs on your Loan Estimate review, not in a guess.

How the Appraisal Sets the Ceiling

A cash-out refinance requires a full appraisal, and the 80% limit applies to adjusted value. If you have owned the home 12 months or more, adjusted value is generally the appraised value. If you bought within the past 12 months, the handbook’s glossary uses the lesser of purchase price plus documented improvements or the appraised value. That rule is one reason standard cash-out is not available on a recently bought home, so confirm the current wording in HUD Handbook 4000.1.

Appraisals are a real risk to the plan. Ask what the check looks like if the value lands 5% lower than you expected. At a 40% payoff the effect is mild, while at a 70% payoff it can erase the cash.

Why the Cap Is 80%

FHA’s cash-out limit was not always this tight. HUD announced the move to 80% as a way to reduce risk in cash-out lending. It followed an earlier drop from 95% to 85% in 2009. Under Mortgagee Letter 2019-11, the 80% cap applies to both loan-to-value and combined loan-to-value for case numbers assigned on or after September 1, 2019.

So if a friend or an older web page says FHA allows 85% or 95%, that information is out of date. Combined loan-to-value means the new loan plus every other lien. You cannot keep a second mortgage and stay under the cap unless the total still fits. County loan limits also apply, and they change every year, so check yours with a loan officer.

Who Qualifies

Eligibility has a few firm pieces. This is a program summary, subject to lender guidelines and full file review. This is not a commitment to lend.

• Occupancy. The home must be your principal residence, owned and occupied for 12 months before the FHA case number.
• Payment history. Lenders look for on-time payments on your mortgages over the prior 12 months, or since the loans began if shorter. A late payment in that window can block a cash-out.
• Credit. The wholesale programs Lendmire places FHA loans with start at a 580 decision score. HUD’s own rules reach lower, but the network does not.
• Ratios. The base pair is 31/43 for housing and total debt with no compensating factors. Documented compensating factors can reach 40/50 at the top tier, and the automated finding governs the ratio limits on many files.
• Paid-off homes. The cash-out definition covers a withdrawal of equity where no mortgage exists, so owning free and clear does not rule you out.
• Other loan types. A qualifying borrower can refinance a conventional or other loan into an FHA cash-out.

Second homes and rentals do not qualify for standard FHA cash-out. Occupancy decides the leverage, and this program is for the home you live in. If you inherited a home, the occupancy history still has to be met. Current handbook language controls here, so ask your loan officer to confirm it.

FHA Cash-Out vs. Streamline vs. Rate-and-Term

The streamline refinances an existing FHA loan with a limited credit review and a net tangible benefit, and the premium continues. If your goal is only to go fixed and you already hold an FHA loan, the streamline may fit better, because no cash comes out and no appraisal is needed. If you need cash, the cash-out route is the one that delivers it.

The Payment Tradeoff

Every added block of cash raises the balance. A larger balance plus mortgage insurance raises the monthly payment. The annual premium is charged monthly. It runs between 0.15% and 0.75% of the balance depending on term, loan amount and LTV, and the rate is set by those factors, not by negotiation.

Duration matters too. On a thirty-year loan above the program’s leverage threshold, the annual premium lasts for the term. At or below that threshold it ends after eleven years. A cash-out at 80% sits below that line, but a streamline or rate-and-term at higher leverage may not. The premium is a program fact, so ask for your own figures on the Loan Estimate. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.

Think about how much cash you really need. Taking the maximum is not the same as taking what you need, and a smaller amount keeps the balance and the payment lower. If you are going fixed for payment stability, a loan that stays closer to your current balance may serve that goal better than one that drains every dollar of equity.

What Happens at Signing

A cash-out refinance on your own home carries a federal right to cancel. The CFPB explains the right of rescission: after you sign, a short window lets you cancel most non-purchase mortgages. Funds are typically disbursed after that window passes, so plan for a gap between signing and receiving cash. If required disclosures were defective, the right can extend much longer.

Rescinding does not wipe out your original mortgage. You still owe that loan. At closing, the closing agent pays off the old loan, any liens and costs, and the remainder goes to you.

Key Terms Defined

Adjusted value: The value FHA uses to set the cap, generally the appraised value for a home owned 12 months or more.

CLTV (combined loan-to-value): The new loan plus every other lien, divided by adjusted value.

Upfront mortgage insurance premium: A one-time premium of 1.75% of the base loan, usually financed into the loan and counted inside the 80% cap.

Annual mortgage insurance premium: A yearly premium, charged monthly, that depends on term, loan amount and LTV.

Right of rescission: A short window after closing in which you can cancel a refinance of your principal home.

Seasoning: The 12 months of ownership and occupancy required before the FHA case number.

Common Misconceptions

• “I can take 80% of my home’s value.” The 80% caps the total loan, not your cash.
• “The 12 months counts back from closing.” It counts back from the case number assignment.
• “Closing costs sit on top of the loan.” They come out of the same capped amount unless you pay them separately.
• “Rescinding cancels my old mortgage.” It does not. You still owe the original loan.
• “Tax rules make the cash simple.” Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.

If You’re Weighing Your Options

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. Lendmire is a mortgage broker licensed for consumer lending in 16 states, and the FHA files it places go through wholesale lenders. 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 brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. HUD Mortgagee Letters and Handbook 4000.1 index

2. HUD Archives press release on the cash-out LTV change

3. HUD Mortgagee Letter 2019-11

4. CFPB: right of rescission