The Quick Read: An FHA cash-out refinance lends up to 80% of your home’s appraised value, and that cap holds whether or not a conventional quote looks expensive. A costly conventional quote changes which loan you can qualify for and what it costs. It does not raise the ceiling. The cash in your hand is the capped amount minus your payoff, closing costs, and any premium rolled into the loan.
Key Takeaways
- The FHA cash-out ceiling is 80% loan-to-value (LTV, the loan as a share of the home’s value) on a home you have owned and lived in for 12 months.
- Your net cash is the ceiling minus what you owe, minus costs and financed premiums.
- FHA’s mortgage insurance follows HUD’s schedule for term, loan amount, and LTV rather than a credit-score grid. That is why FHA can look better than conventional on some files.
- County loan limits can cap the loan before the 80% does. They change every year.
- FHA cash-out is for the home you live in. It is not for second homes or rentals.
What Is an FHA Cash-Out Refinance?
An FHA cash-out refinance replaces your current mortgage with a new, larger FHA-insured first mortgage, and you receive the difference in cash. It is not a second loan stacked on top. The old mortgage is paid off, and a new one takes its place.
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.
Your existing loan does not need to be FHA. A conventional mortgage can be refinanced into an FHA cash-out. The cash also has no required purpose. Many borrowers pay off credit cards, fund repairs, or cover tuition. Lenders may ask about use, but the program does not limit it.
How Is the Maximum Loan Calculated?
The maximum is 80% of your home’s adjusted value, and the appraisal decides what that value is. HUD’s knowledge base states the 80% cap for cash-out refinances on case numbers assigned on or after September 1, 2019. Before that date the cap was 85%. If you see 85% quoted somewhere, the page is out of date.
Here is the step-by-step logic that the wholesale lenders behind these FHA files follow:
1. Get the value. An FHA appraisal sets the adjusted value. A contract price or online estimate does not count.
2. Apply the 80% cap. Multiply the value by 80%. That is the ceiling for the new base loan.
3. Check the county limit. FHA sets loan limits by county, and they change every year. The lower of the two ceilings controls.
4. Add up what must be paid. The new loan must pay off your current mortgage, any second lien, and any costs rolled in.
5. Subtract. Whatever is left under the ceiling is your cash.
Second liens matter here. A home equity loan or HELOC sitting behind your first mortgage counts toward the 80%. It must be paid off or fit inside the limit.
The Net-Cash Formula
Net cash equals the ceiling, minus your payoff, minus closing costs, minus any financed premium. People often forget the last two.
Picture a home that appraises at a round 100 units of value. The 80% cap gives you a ceiling of 80 units. Suppose your payoff is 60 units. That leaves 20 units before costs. Closing costs and the financed upfront premium then come out of that 20. The cash that reaches you is smaller than the headline number.
That is a modeled example, not a quote. The point is the order of operations. Many borrowers start with “80% of my value” and assume that is their check. It is the most the loan can be, not what you receive.
The more you already owe, the thinner the margin. A home with a payoff near 70% of value leaves little room under an 80% cap once costs come out. A home with a payoff near 40% leaves plenty.
What Does Mortgage Insurance Do to the Number?
FHA charges two premiums, and both affect your cash and your budget. The upfront premium is 1.75% of the base loan, and it can be financed into the loan. Financing it means you do not pay it at the table, but the loan balance grows and so does what you owe over time.
The annual premium runs between 0.15% and 0.75% of the balance, depending on term, loan amount, and LTV. It is billed monthly, so it feeds into your payment and your debt ratios. HUD Mortgagee Letter 2023-05 sets the schedule. On a thirty-year loan above 90% LTV, the annual premium lasts for the term. At or below 90%, it ends after eleven years.
A cash-out is capped at 80%, so it falls in the shorter tier. That is my reading of how the schedule applies, so confirm it on your own file. The premium is a program fact, not a price quote. Your Loan Estimate shows the actual figures.
One more point trips people up. A cash-out does not erase mortgage insurance. Upfront premium applies to nearly all FHA mortgages. The 2023 schedule change cut annual premiums, not the upfront charge, per HUD’s announcement.
When Conventional Gets Costly, Does FHA Win?
Sometimes, but not on cash. Conventional cash-out loans have their own leverage limits, and I do not quote them here.
Conventional mortgage insurance and pricing often move with credit score and LTV. A borrower with a middling score and a high balance can see conventional costs climb. FHA’s premium schedule follows HUD’s rules for term, amount, and LTV, so a weaker score does not necessarily push the insurance cost up the same way. FHA still has credit minimums, and lenders may add their own.
Here is how the two compare in practice:
| Factor | FHA Cash-Out | Conventional Cash-Out |
|---|---|---|
| Ceiling | 80% LTV | Varies by lender and occupancy |
| Insurance | Upfront and annual premium | Varies by score and LTV |
| Credit flexibility | Often more room | Often tighter |
| Occupancy | Primary residence | More options |
| Exit path | Refinance later | Often easier to drop insurance |
The last row matters. Many conventional loans let you stop paying mortgage insurance once you build enough equity. FHA annual premiums end after eleven years at or below 90% LTV, which includes a cash-out capped at 80%, but conventional insurance can often be dropped sooner. If you plan to keep the home and loan for a long time, that difference can outweigh better approval odds today.
This is a genuine toss-up for many borrowers. FHA can win on approval and monthly cost when credit is bruised. Conventional can win over ten years if your credit is strong and you want insurance to fall away.
Who Qualifies? The Step-by-Step Underwriting
Underwriting means the lender checks whether you and the home meet the program’s rules. For FHA cash-out, five things decide it.
Ownership and occupancy. You must have owned the home and lived in it as your principal residence for the 12 months before the case number is assigned. If you buy a home and want cash out at month four, you do not qualify yet.
Payment history. The mortgage you are refinancing should show on-time payments, generally measured over the prior 12 months, or the shorter period you have owned the home. If the loan does not show on your credit report, the lender asks for a verification of mortgage or bank statements.
Credit. Across the wholesale programs I place FHA files with, a decision score of 580 or higher is the starting line. HUD sets lower tiers on paper, but the network does not reach below 580. Some lenders set a higher floor for cash-out, and that varies by lender and file.
Debt ratios. The base pair is 31/43. The first number is your housing payment as a share of income. The second is all monthly debts as a share of income. With documented compensating factors, such as strong reserves or a long job history, ratios can reach 40/50 at the top tier. An automated finding governs most files.
The appraisal. It sets the value, and value sets the cap. A low appraisal shrinks your cash dollar for dollar at 80%.
All of this is subject to lender guidelines and full file review. Nothing here is a commitment to lend.
Where the General Rule Breaks
The 80% rule has exceptions and edge cases. These are the ones I see most.
You bought within the last 12 months. A standard cash-out is not available. Waiting is usually the answer.
Your county limit sits below 80% of value. In higher-priced areas, the county limit can control. You get less than the percentage suggests. County loan limits apply, and they change every year, so check yours.
You own the home free and clear. HUD’s definition of cash-out includes withdrawing equity where no mortgage exists. This can work, but the file review looks closer at documentation.
You want cash from a second home or rental. Standard FHA cash-out is for the home you live in. Occupancy decides the leverage, so a non-owner-occupied property falls outside this program.
You recently missed a payment. A late payment in the last 12 months can trigger manual underwriting, and it does not waive the cash-out payment-history rule.
You had a major credit event. HUD’s waiting periods apply, such as two years from a chapter 7 discharge and three years from a foreclosure. These are HUD rules, not a promise about how any lender will treat your file.
Your FHA loan is under three years old. A refund credit toward the new upfront premium may apply on an FHA-to-FHA refinance. Verify it against HUD’s handbook before counting on it.
You inherited the home. Occupancy rules can get complicated, and I would check the handbook text before assuming an exemption.
Is a Cash-Out the Right Tool?
A cash-out refinance swaps your old loan for a new one, so the whole balance resets. A bigger loan can raise your monthly payment and stretch your payoff timeline, as the CFPB’s Using Home Equity guide points out.
Compare it to the alternatives:
| Option | What It Does | Watch For |
|---|---|---|
| FHA cash-out | New first mortgage, 80% cap | Premiums, full reset |
| Conventional cash-out | New first mortgage | Cost tied to score and LTV |
| HELOC | Credit line behind your loan | Keeps your first mortgage as is |
| Home equity loan | Fixed second loan | Second payment on top |
If your current first mortgage is one you like, a HELOC or home equity loan leaves it alone. If your current loan is something you want to replace anyway, a cash-out makes more sense.
One caution on debt consolidation. CFPB research found that borrowers often use cash-out proceeds to pay down credit card and auto debt. Credit scores rose after the refinance, then gradually worsened. Card balances trended back toward their earlier levels over the following year. Paying off cards with home equity only helps if the cards stay paid off.
What Should You Do Next?
Work backward from the cash you need. Start with the amount, then check whether the 80% ceiling, your payoff, and costs leave room for it.
A practical order:
1. Estimate your home’s value and your current payoff, including any second lien.
2. Run the formula: 80% of value, minus payoff, minus costs and premium.
3. Confirm you meet the 12-month ownership and payment-history tests.
4. Gather pay records, bank statements, and mortgage statements.
5. Compare the FHA result against a conventional quote and a HELOC.
If the net cash falls short, you have three choices: borrow less, wait for more equity, or pick a different product. A smaller need with a larger margin is often the cleaner path.
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.
Key Terms Defined
Adjusted value: The home value FHA uses to set the cap, based on the appraisal.
LTV (loan-to-value): The loan balance as a percentage of the home’s value.
CLTV (combined loan-to-value): All loans on the home, first and second, as a percentage of value.
Base loan amount: The loan before the financed upfront premium is added.
Mortgage insurance premium (MIP): FHA’s insurance charge, paid upfront and annually.
Case number: The FHA identifier assigned to your file, which starts the rule clock.
Frequently Asked Questions
Can I get more than 80% with an FHA cash-out?
No. The cap is 80% of adjusted value for cash-out refinances, and HUD’s older 85% limit no longer applies. If you need higher leverage, a rate-and-term refinance reaches 97.75% on a principal residence, but it pays off debt and costs only. It does not give you cash.
Do I need an existing FHA loan to do an FHA cash-out?
No. A conventional or other loan can be refinanced into an FHA cash-out, provided you meet the ownership, occupancy, and payment-history tests. Your current loan type does not decide eligibility. The home and your file do.
Will FHA lend me more cash than conventional?
Not necessarily. FHA’s draw is often easier approval and a different insurance structure, not a bigger check. Compare the net cash on both, after costs and premiums, before choosing.
Is the upfront mortgage insurance premium added to my loan?
It can be financed. That means you do not pay the 1.75% at the table, but your balance rises by that amount. Your Loan Estimate shows how it affects your file, and every figure is subject to lender guidelines.
Can I do an FHA cash-out on a second home?
No. Standard FHA cash-out is for your principal residence, and occupancy decides the leverage. A second home or rental falls outside the program.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s FHA loan programs page.
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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References
1. HUD Mortgagee Letter 2023-05
3. CFPB: Using Home Equity guide
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 an FHA Cash-Out Limits How Much Home Equity You Can Take · How to Use the Inheritance Exception on an FHA Cash-Out · How to Get an FHA Cash-Out When Conventional Costs Too Much
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.