The Quick Read: An FHA cash-out refinance replaces your current mortgage with a new, larger one and hands you the difference in cash. You generally must own and live in the home as your primary residence for 12 months before the case number is assigned. The new loan can reach up to 80% of the home’s appraised value. Because it is a brand-new loan, the clock restarts, and a 30-year term is the common choice, though not a requirement.
What Is an FHA Cash-Out Refinance?
It is a new FHA-insured mortgage that pays off your old one and puts extra cash in your hand. You do not need to have an FHA loan today. A conventional borrower can refinance into one, and so can someone who owns the home free and clear.
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.
Think of it as three buckets that all have to fit under one ceiling: the payoff of your old loan, the closing costs you choose to roll in, and the cash you take. Every dollar rolled into costs is a dollar you do not receive.
Because occupancy decides the leverage, a second home or a rental does not fit this loan.
Key Terms Defined
Cash-out refinance: a new mortgage larger than your current balance, with the extra amount paid to you at closing.
LTV (loan-to-value): the loan amount divided by the home’s appraised value, shown as a percentage.
Seasoning: the waiting period you must meet before a loan type is available, such as owning and living in the home for 12 months.
Amortization: the schedule that splits each payment between interest and principal over the loan’s term.
Mortgage insurance premium (MIP): the insurance FHA loans carry, with an upfront piece and an annual piece.
Case number: the file number assigned to your FHA loan. Many of the timing tests count back from this date.
What Are the Core Requirements?
Here is the short list. Every item is subject to lender guidelines and full file review.
- Occupancy: the home is your principal residence.
- Ownership and occupancy history: you owned and lived in it for 12 months before the case number.
- Maximum loan: up to 80% LTV on the appraised value.
- Credit: a decision score of 580 or higher is where the programs we use start.
- Debt ratios: the base pair is 31/43 (housing cost / total debts) with no compensating factors.
- Appraisal: required, because the 80% test depends on it. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Some lenders add their own stricter rules on top of FHA’s. These are called overlays. A lender may ask for a higher score or a cleaner payment history than the minimum. Ask any lender which requirements are FHA’s and which are theirs.
How the Cap Works
The cap is set as a share of the home’s adjusted value, and it covers your new loan plus any other liens. HUD set it in Mortgagee Letter 2019-11, which lowered the limit from an earlier, higher cap for case numbers assigned on or after September 1, 2019. HUD’s press release traces the history of how the limit was stepped down over time.
So the rule is not new, and it is not 85%. If you hear a higher figure, it is out of date.
The practical result: you must keep at least 20% equity after closing. Appreciation in your home helps you only because the appraisal reflects it. It does not shorten the 12-month wait.
Debt Ratios in Plain Words
Lenders compare two percentages. The first is your housing cost against your income. The second is all your monthly debts against your income. The base pair is 31/43, with no compensating factors. When a file documents compensating factors, such as strong savings or a long job history, the limits can stretch as far as 40/50 at the highest tier, and the automated finding governs most files.
How Is the Loan Underwritten, Step by Step?
The process runs in a clear order. Knowing it helps you spot where a file stalls.
1. Eligibility screen. The lender confirms you meet the primary-residence rule and the 12-month history.
2. Application and credit review. The lender pulls credit and looks at your income, debts, and mortgage payment history.
3. Case number. The FHA case number is assigned. The 12-month test counts back from this date.
4. Appraisal. A full appraisal sets the value the 80% test uses.
5. Maximum loan calculation. The lender adds up the payoff, costs, and the cash you want, then checks the total against the ceiling.
6. Underwriting decision. The file is reviewed against FHA rules and the lender’s own.
7. Loan Estimate and Closing Disclosure. You receive both as a consumer mortgage. Compare the final numbers to the estimate.
Typical documents include recent pay records, tax returns where income needs them, bank statements, your current mortgage statement, and proof of homeowners insurance.
One practical tip: check your current loan documents for a prepayment penalty before you start. The CFPB’s refinance handout recommends that step along with weighing the full cost of the new loan.
What Does the 30-Year Reset Actually Change?
A refinance is a new loan. That means a new term, a new amortization schedule, and a new payoff date. The CFPB notes the new term “could be longer” than what you have left.
Here is the part many borrowers miss: the 30-year term is a choice, not an FHA requirement. The CFPB handout says borrowers can often pick a custom term, such as 22 years instead of 30. Ask your lender which terms it offers.
What resets:
- The payoff date. It moves out to the end of the new term.
- The amortization. Early payments on a new loan go mostly to interest, even if you were deep into principal on the old one.
- The mortgage insurance clock. The new loan carries its own premium schedule.
What does not change is the home itself. You still own it, and your equity belongs to you. But a lower monthly payment can come from stretching the term rather than from a better deal. A longer term can mean more total interest over the life of the loan.
And because the new balance includes your payoff, costs, and cash, the payment can go up even if the new loan is cheaper per dollar borrowed.
Three Term Paths Compared
| Path | Payoff date | Monthly payment | Total interest |
|---|---|---|---|
| Keep your current loan | Stays put | Unchanged | No new cost |
| New 30-year term | Pushed out | Often lower per dollar | Usually higher overall |
| Shorter custom term | Pulled in | Often higher | Usually lower overall |
This table shows direction only.
What Mortgage Insurance Applies?
Every FHA cash-out refinance carries mortgage insurance. Across the programs we place files with, there are two parts. The upfront premium is 1.75% of the base loan, and it can be financed into the loan. The annual premium falls between 0.15% and 0.75% of the balance, depending on term, loan amount, and LTV.
Duration matters here. HUD’s guidance on MIP duration says that for case numbers assigned on or after June 3, 2013, the annual premium lasts the loan’s term when LTV is above 90% at origination. At 90% or below, it ends after 11 years.
Since the cash-out cap is 80%, your loan would sit in the lower tier. Confirm how this applies on your own file. The popular line that FHA insurance “always lasts the life of the loan” is not accurate for loans of this vintage.
Where Do the Rules Bend or Break?
Owned less than 12 months. Standard cash-out is generally unavailable. An FHA rate-and-term refinance, which does not give you cash, follows different leverage limits. On a principal residence you have occupied for the previous 12 months, it reaches 97.75%.
Bought and rented first. Owning the home for a year while renting it does not meet the occupancy test. The test is about living there.
Inherited home. If you inherit a property and rent it out, you are not cash-out eligible until you have lived in it for 12 months. Older HUD guidance was more flexible for people who moved in right away. That guidance is archived and tied to the old 85% limit, so treat it as history and check current rules with your lender.
Free-and-clear homes. Homes with no mortgage can generally be refinanced as cash-out. Confirm the current terms with a lender.
Hawaiian Homelands. Section 247 mortgages were exempt from the 80% change, according to a law-firm summary of the HUD letter.
Payment history. Some lenders require a clean recent history on your current mortgage. The exact test varies by lender, so ask what theirs is.
Credit events. HUD sets waiting periods after major events: two years from a Chapter 7 discharge and three years from a foreclosure. Those are HUD’s rules, not a promise about any particular file.
Which Refinance Fits: Cash-Out, Streamline, or Conventional?
The right loan depends on what you want from the transaction.
| Factor | FHA cash-out | FHA Streamline | FHA rate-and-term |
|---|---|---|---|
| Takes cash out | Yes | No | No |
| Needs existing FHA loan | No | Yes | No |
| Appraisal | Yes | No | Yes |
| Top leverage | 80% LTV | Based on current loan | 97.75% |
The Streamline is the lightest option. It refinances an existing FHA loan with no appraisal and a limited credit review, but it requires a net tangible benefit, and the premium continues. It is not a cash-out tool.
A conventional cash-out is a separate product with its own rules. VA and USDA programs are separate too. Do not carry FHA numbers over to them.
What Do Closing Costs Look Like?
Costs on a refinance tie to the whole new loan, not just the cash you take. You can pay them at closing, have them deducted from your proceeds, or finance them within the LTV cap.
That last option has a catch. Financing costs lowers the cash you receive, because everything must fit under the same ceiling. “Zero cash to close” does not mean zero costs. It means they were netted from proceeds or added to the balance.
On your Closing Disclosure, total closing costs and cash to close are different lines. Read both.
When Does the Reset Help, and When Does It Hurt?
This one is a real judgment call. Neither answer is right for everyone.
It can make sense when:
- You need cash for a defined purpose, such as repairs or paying off higher-cost debt, and the numbers hold after costs.
- Your budget needs breathing room, and you accept that the payoff date moves out.
- You pick a term you can sustain, not just the longest one offered.
It tends to hurt when:
- You are well into your current loan, and restarting amortization sends early payments back to interest.
- You want a lower payment and nothing else. A longer term lowers the payment while adding years of interest.
- You are close to the 12-month mark and could wait for the standard cash-out.
- You are using the cash for spending that will not hold value.
Picture a homeowner 15 years into a 30-year loan who takes cash out into a new 30-year term. The payoff moves from 15 years away to 30. That may be fine for a big, planned expense. It is a poor trade for a one-time splurge.
A useful test: compare the new loan not only to your current payment but to your current payoff date. Ask a lender to show a shorter custom term next to the 30-year one.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
What Should You Ask a Lender Before You Apply?
- Which terms do you offer besides 30 years?
- Which requirements are FHA’s and which are your overlays?
- What payment history do you require on my current loan?
- How much of my cash-out goes to costs if I finance them?
- Does my current loan carry a prepayment penalty?
- How does the annual mortgage insurance schedule apply to my LTV?
- How would a Streamline or rate-and-term compare for my goal?
Lendmire is a mortgage broker, not a lender, and arranges FHA loans through wholesale lenders. Every parameter here is subject to lender guidelines and full file review, and none of it is a commitment to lend.
Frequently Asked Questions
Do I have to take a 30-year term on an FHA cash-out refinance?
No. The 30-year term is the common choice, but it is not an FHA requirement. The CFPB notes that borrowers can often choose a custom term. Ask for a shorter option and compare it side by side with the 30-year version before you decide.
How long must I own the home before I can do a cash-out refinance?
You generally need to have owned and lived in the home as your primary residence for 12 months before the case number is assigned.
How much can I borrow against my home?
Up to 80% of the home’s appraised value, counting the new loan plus any other liens. Your payoff, any financed costs, and your cash all share that ceiling. County loan limits also apply.
Does FHA mortgage insurance last for the whole loan?
Not necessarily. For case numbers assigned on or after June 3, 2013, the annual premium lasts the term when LTV is above 90% at origination. A cash-out loan capped at 80% would fall in the second group.
Do I need an FHA loan already?
No. You can refinance into an FHA cash-out from a conventional loan or from a home with no mortgage. The Streamline is the one that requires an existing FHA loan, and it does not provide cash.
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, 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.
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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 Mortgagee Letter 2019-11
2. HUD press release on cash-out risk
4. HUD Answers: How long is MIP collected
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: FHA Cash-Out Refinance Requirements With a 580 Credit Score · Top FHA Cash-Out Refinance Providers for Homeowners With an Existing FHA Mortgage · Banks That Offer an FHA Cash-Out Refinance to Maximize Your Cash Out
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.