FHA Cash-Out Refinance Maximum LTV Requirements on a Primary Home

The Quick Read: The maximum loan-to-value on an FHA cash-out refinance of a primary home is 80% of the home’s appraised (adjusted) value. That cap covers the whole new loan, not just the cash you take out. Other liens that stay on the home count toward it. It is a ceiling, not a promise, and credit, income, the appraisal and the file review decide where you land under it.

What Does “Maximum LTV” Mean on an FHA Cash-Out?

LTV is the new loan balance divided by the appraised value. On a cash-out, the new loan pays off your current mortgage, covers any financed closing costs, and puts the rest in your hands. All of that sits inside the 80% line.

So the cap also protects your equity. At 80% LTV, you keep at least 20% of the value in the home. Borrowers sometimes hear “80%” and think it means 80% of their equity. It doesn’t. It means 80% of the value. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.

HUD Mortgagee Letter 2019-11 set this rule. It cut the maximum LTV and combined LTV on FHA cash-out refinances to 80% of adjusted value, down from 85%. HUD’s stated reason was to reduce risk to the FHA insurance fund. The cap had been brought down from 95% to 85% back in 2009. Some older web pages still show 85%. They are stale.

How Is the Maximum Loan Worked Out, Step by Step?

The arithmetic is short. The appraisal drives all of it.

1. Get the appraised value. The 80% is applied to the adjusted value the appraisal supports. A low appraisal lowers the ceiling directly.

2. Multiply by 80%. That is the largest base loan the program allows on the home.

3. Subtract what the loan must cover. The payoff of your current mortgage and any liens that must be paid off come first. Closing costs that you choose to finance come next.

4. What remains is your cash. If the payoff and costs use most of the room, the cash is small. If you owe little, the cash is larger.

Run it in percentages. On a home where you owe about 55% of the value, the 80% cap leaves roughly 25% of the value before costs. Financed closing costs then come out of that, and what is left is your cash.

How Does the Financed Premium Fit With the Cap?

It is a cost of the loan, not cash to you. Across the wholesale programs Lendmire places FHA files with, the upfront premium is 1.75% of the base loan and is financed. The 80% cap is the ceiling on the base loan. The premium is figured on that base loan and added to the balance. It does not put money in your pocket.

How a given lender shows the premium against the cap is laid out on your Loan Estimate, so read that line with the loan officer. Do not assume the premium is free room.

The annual premium runs between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV. At 80% LTV on a thirty-year loan, the annual premium ends after eleven years, since the LTV is at or below ninety percent. Above ninety percent it lasts for the term, but a cash-out at the cap sits below that line. These are program mechanics, not prices, and they are subject to lender guidelines and full file review.

Which Primary-Home Conditions Come With the Cap?

The 80% cap applies to a home you own and live in. The file needs to show a few things.

• Ownership and occupancy. The home is owned and occupied as your principal residence for 12 months before the FHA case number is assigned. Lenders look at utility bills or employment records to confirm it.
• Payment history. Expect the lender to review the existing mortgage payments over the past year. A late payment in that window can delay or block a cash-out even with plenty of equity.
• Credit and ratios. FHA files in the network start at a 580 decision score. Ratios start at the 31/43 base pair, with documented compensating factors reaching 40/50 at the top tier. The automated finding governs most files.
• County loan limits. FHA sets a loan limit by county, and it changes every year. The new loan has to fit under both the 80% cap and the county limit. Whichever is lower controls. County loan limits apply, so check yours with a loan officer rather than assuming.

The payment-history and occupancy wording here comes from HUD’s policy, which lives in HUD Handbook 4000.1, the single source of Single Family Housing policy. Lenders read the current text, and wording can change between updates.

Where Does the General Rule Bend?

The 80% rule has named edge cases. Most files never touch them, but they come up.

A low appraisal. The cap shrinks with the value. If the appraisal comes in under what you expected, the maximum loan drops with it, and the cash drops faster. A reconsideration request with recent nearby sales can help in some cases, but the lender and appraiser decide.

Second liens and HELOCs. The 80% is a combined limit. A second mortgage or HELOC that stays on the home uses up room rather than adding any. Borrowers who think a second lien lets them go past the cap have it backwards. Many files pay the second lien off in the refinance for exactly this reason.

A home with no mortgage. Still a cash-out refinance. Taking equity out of a paid-off home counts as cash-out and follows the same 80% ceiling.

An existing loan that isn’t FHA. You can refinance a conventional or other loan into an FHA cash-out. The old loan type doesn’t have to match.

An inherited home. HUD’s policy treats these differently on the occupancy-period test, as long as the home was never used as an investment property after you inherited it. Standard occupancy rules apply after the refinance. Confirm the current Handbook language with the lender before counting on this.

Owned less than 12 months. Expect tighter treatment, and value limits tied to the purchase price in some cases. In the network’s FHA cash-out program, the 12-month ownership and occupancy test is the working line.

Hawaiian Home Lands. The 2019 reduction does not apply to Section 247 mortgages, per the same HUD letter.

Second homes and rentals. FHA cash-out is for the home you live in. Occupancy decides the leverage, so a second home or rental falls outside this program.

How Does FHA Compare With Other Programs on a Primary Home?

The cap changes by program. This is a quick lookup, not a full comparison.

The rate-and-term row matters. If your goal is only a different loan with no cash, the FHA rate-and-term reaches 97.75% on a principal residence occupied for the previous twelve months. The cash-out cap is lower because you are pulling equity out.

For how the conventional side sets its limits, Lendmire’s article Conventional Cash-Out Refinance LTV Limits for a Primary Home lays out the comparison. If your home has two to four units, see the FHA cash-out LTV limit on a 2-4 unit primary home.

What Can Lower Your Real Maximum?

The cap is the ceiling. Several things push the actual number below it.

• The appraisal. It sets the value that 80% is applied to.
• Existing liens. Second mortgages and HELOCs that stay in place count toward the limit.
• Credit and ratios. A file that clears the cap on paper can still be held back by a weak score or a ratio above what the automated finding accepts.
• Payment history. A late payment in the review window can stop the file.
• Lender overlays. Individual lenders can set tighter rules than the program minimum, so the effective cap can sit lower than 80% at a given lender. Across the wholesale network, overlays are a normal part of matching a file to the right lender.
• Financed closing costs. Costs rolled into the loan use up room under the cap before any cash reaches you.

An approval is never implied by the cap. Credit, income, the appraisal and the new payment all still matter.

Is a Cash-Out the Right Move?

That depends on what the cash is for and what it costs to get it. A cash-out replaces your current loan with a larger one, and the terms reset. The CFPB’s guide on using home equity notes that a cash-out can lengthen payoff time and raise the monthly payment, and that no equity option converts all of your equity to cash.

Debt payoff is a common use. CFPB survey data show paying off debts is the most common reason for a cash-out refinance, with home repairs second. The trade is real, though. Moving credit card balances into the mortgage puts the home behind that debt. Missing a card payment rarely costs you the house. Missing a mortgage payment can.

A simple test: the cost of pulling the cash out, meaning the new loan’s interest and origination costs, should be lower than the cost of keeping the debt you are paying off. If it isn’t, leave it alone.

Key Terms Defined

Loan-to-value (LTV): The new loan balance divided by the home’s appraised value.

Combined LTV (CLTV): The total of all loans against the home, divided by its value.

Adjusted value: The appraised value HUD’s formula uses to apply the 80% cap.

Seasoning: The time you have owned and lived in the home before the case number is assigned.

Financed premium: The upfront mortgage insurance amount added to the loan balance rather than paid in cash.

Next Step

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. The brokerage arranges FHA, VA, conventional and jumbo loans through wholesale lenders, and you can start with the FHA cash-out refinance program. Every figure here is 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.

For the program’s current guidelines, see FHA loan programs.

References

1. HUD Mortgagee Letter 2019-11

2. HUD Handbook 4000.1 Overview

3. CFPB: Using Your Home Equity guide

4. CFPB newsroom: cash-out borrowers and credit scores