The Quick Read: No. On a home you live in, an FHA cash-out refinance reaches 80% of the home’s appraised value, and a conventional cash-out loan on a one-unit primary residence generally lands at the same 80%. The old idea that FHA lets you pull out more is out of date. FHA’s real edge is flexibility on credit and qualifying, not extra leverage. Every program is subject to lender guidelines and full file review.
Why Does the Old “FHA Lets You Borrow More” Idea Persist?
It persists because it used to be true. HUD’s Mortgagee Letter 2019-11 cut the maximum loan-to-value and combined loan-to-value on FHA cash-out refinances from 85% to 80% of adjusted value. The same letter notes the cap was 95% before 2009. An earlier HUD notice, Mortgagee Letter 2009-08, set the 85% figure that stood for a decade.
FHA cash-out estimate
Seeded with an example value, a balance to match, and a round cash request; change any field.
Editable benchmark: 7.32% as of October 22, 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.
So there were three eras: 95%, then 85%, then 80%. Plenty of web pages still carry the middle number. If a page says FHA reaches 85%, it is stale.
Conventional loans backed by Fannie Mae and Freddie Mac have long sat near 80% on a one-unit primary residence. Two- to four-unit primary homes sit lower. Check the current Fannie Mae Selling Guide for the exact cap on your property type, since those tables get updated.
The gap closed. Today the two programs cap the new loan at about the same share of value.
How Does an FHA Cash-Out Refinance Work?
An FHA cash-out refinance replaces your current mortgage with a new FHA loan that is larger than what you owe. The difference, after costs, comes to you as cash. Across the wholesale programs Lendmire places FHA files with, the cash-out reaches 80% LTV on a home you have owned and occupied for 12 months before the case number is assigned. Lendmire’s FHA cash-out refinance program page covers the program in more detail. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Here is the sequence a file follows:
1. Ownership and occupancy check. The home must be your principal residence, and you must have owned and lived in it for 12 months before the FHA case number.
2. Payment history review. The lender looks at how the loan you are refinancing has been paid. Late payments in the recent past can stop the file.
3. New appraisal. The appraiser sets “adjusted value.” The 80% cap applies to that number, not your own estimate of what the home is worth.
4. Every lien counts. HUD’s cap applies to both the loan-to-value and the combined loan-to-value. A second mortgage or HELOC does not let you climb past 80%.
5. Payoff comes first. Your existing mortgage, and any other liens, get paid off from the new loan. Financed closing costs come out next.
6. Mortgage insurance is added. The upfront premium is 1.75% of the base loan amount and can be financed, per HUD Mortgagee Letter 2023-05. An annual premium also applies. Across the programs Lendmire works with, it ranges from 0.15% to 0.75% of the balance, depending on term, loan amount, and LTV.
7. What’s left is your cash. That remainder is smaller than most people expect.
County loan limits also apply to FHA loans. They change every year, so check the current limit for your county before assuming a number.
What Actually Limits Your Cash?
The 80% cap applies to the whole new loan. It is not 80% of your equity, and it is not a cash-back percentage. Think of it as a ceiling on total debt against the home.
Run it with percentages. Say a home is appraised at some value and you currently owe 50% of it. A new base loan at 80% of that appraised value leaves roughly 30 points of value as room. Then the payoff, any other liens, and closing costs come out of that room. The 1.75% upfront premium is figured on the base loan and financed on top of it, so it adds to the balance you owe rather than coming out of the 80% room. What reaches your account is the remainder.
Three things shrink the cash:
- The payoff. The more you still owe, the less is left.
- Closing costs. Costs rolled into the loan use up room under the cap.
- Appraisal risk. If the appraisal lands below what you expected, the 80% applies to a smaller base.
The financed upfront premium does not shrink the cash, but it raises the balance and the interest on it. A higher credit score does not move this ceiling. A stronger file may help you qualify, but it does not buy more cash on an FHA loan.
FHA vs. Conventional Cash-Out: Side by Side
| Factor | FHA cash-out | Conventional cash-out |
|---|---|---|
| Maximum LTV, primary home | 80% of adjusted value | Generally 80% (one unit) |
| Two- to four-unit primary | Occupancy rules apply | Cap generally lower |
| Occupancy | Principal residence | Also covers second homes, at lower caps |
| Credit posture | Lower floors than many lenders’ conventional files | Typically stronger credit expected |
| Mortgage insurance | Upfront 1.75% plus annual premium | None on a cash-out at 80%, in most cases |
| Ratio flexibility | 31/43 base, up to 40/50 with documented factors | Set by automated findings |
Where the numbers match, the difference shows up in cost and qualifying. FHA charges mortgage insurance on every cash-out. A conventional cash-out at 80% usually does not carry monthly mortgage insurance. For a borrower with solid credit and a clean payment history, conventional often costs less over time. For a borrower whose credit or ratios sit outside conventional standards, FHA can be the program that works at all.
Lendmire’s piece How Much Home Value a Conventional Cash-Out Refinance Lets You Borrow walks through the conventional side in detail.
When Does FHA Come Out Ahead?
FHA wins on qualifying, not on size. From a 580 decision score, the programs Lendmire places loans with reach their maximum financing, and ratios can stretch to 40/50 with documented compensating factors. Some lenders set a higher credit floor than that, which is called an overlay. Overlays differ by lender, which is why the same file can get different answers in different places.
Picture a homeowner with a 640 score, a recent but resolved late payment history, and a debt load that pushes the ratios to the high 40s. A conventional file may stall on the ratios. The FHA file may clear, because the program allows more room with documented factors.
Now picture the reverse: a homeowner with a score well into the 700s, a low balance, and a stable income. Both programs reach the same 80% ceiling. The conventional loan skips the mortgage insurance. That borrower usually looks at conventional first.
A genuine toss-up exists in the middle. A borrower at moderate credit with moderate equity might qualify for either. The deciding line then becomes the cost of the insurance premium against the pricing on the conventional side. A broker can lay both side by side.
Is the financed upfront premium worth it? That depends on how long the loan will be kept. A short hold favors avoiding the extra cost. A long hold, where the annual premium keeps running, makes the total cost larger. On a 30-year loan above 90% LTV the annual premium lasts the full term. At or below 90% LTV it ends after eleven years. A cash-out at 80% LTV falls in the second group. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
What Are the Exceptions and Edge Cases?
Most borrowers hit the standard path. A few do not.
Hawaiian Home Lands. The 80% reduction does not apply to Section 247 mortgages, per the HUD letter.
Limited cash-out is a different product. Fannie Mae’s limited cash-out refinance allows up to 97% on a one-unit principal residence. Don’t read that as more cash. It pays off the existing loan and gives almost no money back. It also requires a fixed rate and automated underwriting, and the loan being refinanced must be owned by Fannie Mae. Sites that show 97% beside a conventional cash-out figure are mixing two products.
Manufactured homes. Conventional limits run lower on manufactured housing, and some homes are not eligible. Fannie Mae’s manufactured housing product matrix shows the differences.
Other FHA refinances. The FHA Streamline refinances an existing FHA loan with no appraisal and a limited credit review. It requires a net tangible benefit. It is not a cash-out product. The FHA rate-and-term refinance reaches 97.75% on a principal residence occupied for the previous twelve months, but it pays no cash to you.
Second homes and rentals. One sentence settles it: FHA cash-out is for the home you live in, and occupancy decides the leverage.
Inherited homes and free-and-clear homes. Some lenders treat these differently on the occupancy clock or the payoff step. The rules are lender-specific, so ask before assuming.
HUD revises its handbook from time to time. Use HUD’s current Handbook 4000.1 as the final word on any detail here.
Key Terms Defined
Adjusted value: The appraised value HUD uses, after its adjustments, as the base for the loan-to-value cap.
LTV (loan-to-value): The new first mortgage divided by the home’s value.
CLTV (combined loan-to-value): All liens on the home added together, divided by value.
Upfront mortgage insurance premium: A one-time FHA charge of 1.75% of the base loan, which can be financed.
Annual mortgage insurance premium: An FHA charge built into the monthly payment, set by term, loan amount, and LTV.
Overlay: A stricter rule a lender adds on top of the program’s minimum.
What Does It Mean for Your Budget?
Two effects are mechanical. Financing the upfront premium makes the balance larger, so you pay interest on it. The annual premium adds to the monthly payment for as long as it applies. Neither shows up in the 80% headline, but both change what the loan costs.
Closing costs also come out of your proceeds. The Consumer Financial Protection Bureau’s research on cash-out refinances lists origination fees, appraisal fees, title insurance, and taxes and fees as typical cash-out costs. It also notes a borrower may use the cash to cover those costs.
One more point from the same report deserves attention. Rolling credit card or other unsecured debt into a mortgage puts that debt behind your home. If payments become unsustainable, the home is at risk. Defaulting on unsecured debt is unlikely to cost you the home. Weigh that before using cash-out to clear cards.
What Should You Do If the Cap Is Too Low?
If 80% does not give you the cash you need, the options are limited, and none of them are magic.
- Borrow less. Take what you need, not the maximum. A smaller loan leaves you with a smaller financed premium.
- Compare conventional. If your credit and ratios fit, the same 80% ceiling comes without FHA mortgage insurance.
- Compare other structures. A separate second lien, a different property type, or a different occupancy status changes the math. Each has its own limits.
- Wait. If the 12-month occupancy or payment-history test is the problem, time fixes it.
Pre-Application Checklist
Gather these before the file goes in:
- Your current mortgage statement, with the payoff amount.
- Twelve months of payment history on that loan.
- Proof you have lived in the home for at least 12 months.
- Income documents and a list of monthly debts, so the ratios can be checked.
- A realistic view of what the home will appraise for.
- A clear reason for the cash and a number you actually need.
Missing pieces here are the usual cause of delays on these files, not the program itself.
Frequently Asked Questions
Do I need an FHA loan already to do an FHA cash-out refinance?
No. The loan being refinanced can be conventional, FHA, or another type, and a home with no mortgage can sometimes be refinanced too, depending on the lender. The occupancy and payment-history tests apply either way.
Can a second mortgage or HELOC push me past the 80% cap?
No. HUD sets the cap on both loan-to-value and combined loan-to-value, so every lien counts toward the same 80%.
Does a higher credit score get me more cash?
No. A stronger score can help you qualify and may widen your options, but the FHA ceiling does not rise with score. The cap stays at 80% of adjusted value.
Is a limited cash-out refinance the same thing?
No. It is a separate conventional product that allows higher leverage but gives back almost no cash. It is built to replace a loan, not to pull out equity.
Why do some websites show 85% or 95% for FHA?
Those were earlier caps. HUD’s 2009 letter set 85%, and its 2019 letter cut that to 80%. Pages that still show the older numbers have not been updated.
Where This Leaves You
FHA cash-out and conventional cash-out reach about the same share of value on a home you live in. The choice comes down to credit, ratios, and how much the mortgage insurance changes your cost. 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. 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 broker licensed for consumer lending in 16 states. Lendmire arranges FHA, VA, conventional and jumbo purchase and refinance loans through wholesale lenders; every file is underwritten by the lender under the applicable program 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 Mortgagee Letter 2009-08
3. HUD Mortgagee Letter 2023-05
4. Fannie Mae Selling Guide: Limited Cash-Out Refinance Transactions
5. Fannie Mae Manufactured Housing Product Matrix
6. CFPB: Cash-Out Refinances and Paydown Behavior of Non-Mortgage Debt Balances
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: Is an FHA Cash-Out Refinance Easier to Get Than a Conventional One? · Cash-Out Refinance LTV Limits for Conventional, FHA and VA Loans · Should You Choose an FHA Cash-Out Refinance Over a Streamline?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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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.