The Quick Read: Not as cash. If your old loan is an FHA loan and the new cash-out loan is also FHA, the unearned part of the old upfront premium can be credited against the new loan’s upfront premium. That credit exists only inside the first three years of the old loan’s insurance, and it shrinks each month. Nothing is paid to you as a check.
What Is the Upfront Premium, and How Is It Different From the Monthly One?
The upfront premium is a one-time mortgage insurance charge on an FHA loan. On the wholesale programs Lendmire places files with, it is 1.75% of the base loan amount, and it is normally financed into the loan balance instead of paid at the table. The annual premium is a separate charge spread across the year and billed monthly. It runs between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV.
Those two charges behave differently when you refinance. Only the upfront premium has a credit mechanism. The annual premium is never refunded or credited. Mixing the two up is the most common misread on this topic.
How Does the Credit Work When You Refinance FHA to FHA?
The credit works as an offset, not a payout. HUD’s FHA fact sheet states that when an FHA loan is refinanced, the refund from the old premium may be applied toward the upfront premium required for the new loan. The old loan has to be FHA-insured, and the new loan has to be a new FHA-insured loan.
Here is what happens inside a file:
1. The lender identifies the old loan by its FHA case number and confirms it is FHA-insured.
2. The lender runs HUD’s Refinance Credit Query in FHA Connection. Per HUD’s field descriptions for that screen, the credit is calculated from the projected closing date of the new loan. The screen shows the months the old loan was insured, a refund factor, the premium HUD has earned, and the unearned premium, which is the credit.
3. The credit is netted against the new loan’s upfront premium. It lowers the premium due. It does not create a deposit to you.
4. The new premium, now reduced, is either financed into the loan or paid in cash. HUD’s handbook language, as quoted by FHA News and Views, treats the premium as all financed or all cash, not split. So the credit lowers either the financed amount or the cash due at closing.
You do not request the credit. The lender runs it. Your job is to ask to see the query printout.
Does a Cash-Out Refinance Get the Credit?
Yes, if the old loan is FHA and the cash-out is a new FHA loan inside the window. Some sites say cash-out is excluded. The HUD sources do not say that. The fact sheet speaks of refinancing to a new FHA-insured loan generally and does not limit the credit to streamline refinances.
Here is why the confusion exists. The credit and the cash-out rules are separate tracks. The credit reduces the premium on the new loan. It does not make you eligible for cash-out, and it does not add to the cash you take. Eligibility is decided by the usual items: LTV, credit, payment history and occupancy.
On the programs Lendmire works with, an FHA cash-out reaches 80% LTV on a home you have owned and lived in for 12 months before the case number. Details are covered on Lendmire’s FHA cash-out refinance program page. Subject to lender guidelines and full file review, every one of those conditions has to be met on its own.
Now the catch. The credit ends after the third year of insurance. A cash-out needs at least a year of ownership and occupancy first. So the overlap is a window of roughly months 12 through 36 of the old loan. A cash-out borrower in month 40 gets no credit at all. One in month 14 gets a larger piece than one in month 34.
How Much Is the Credit Worth?
It depends on four things, and only the lender’s HUD query can give the number:
- Whether the old loan is FHA-insured.
- How many months of insurance have run at the projected closing date.
- How much upfront premium was actually paid on the old loan.
- The new base loan amount.
The credit declines each month and is gone after month 36. A few weeks can change the refund factor, which is why the lender runs the query against the projected closing date, not today’s date. No month-by-month percentages are printed here, because the schedule has to come from the lender’s query, not from a chart on a web page.
Also keep in mind that a cash-out makes the base loan larger, so the new 1.75% premium is larger too. The credit offsets part of that premium, not all of it. Net benefit is simple to frame: the new premium minus the credit, set against the cash you are taking out.
What Does Each Refinance Type Do With the Old Premium?
| Transaction | Old premium credit? | What decides it |
|---|---|---|
| FHA cash-out, old loan FHA | Yes, inside 3 years | Months insured at closing |
| FHA Streamline, old loan FHA | Yes, inside 3 years | Months insured; no appraisal |
| FHA rate-and-term, old loan FHA | Yes, inside 3 years | Months insured |
| Conventional refinance of FHA loan | No | Credit is FHA-to-FHA only |
| Conventional or VA loan to FHA | Nothing to credit | No prior FHA premium |
The Streamline carries its own upfront-premium factor, and HUD’s query screen notes that certain fields on it are valid only for a streamline case. The mechanism is the same. Ask the lender which factor applies to your loan.
What Are the Exceptions?
A few cases change the answer:
- Old loan not FHA. No prior premium, no credit. Paying off, selling or refinancing to conventional also returns nothing under the credit rule, per the fact sheet’s FHA-to-FHA limit.
- Past the third year. The HUD Office of Inspector General describes Mortgagee Letter 2005-03, which ended refunds except on FHA-to-FHA refinances for loans endorsed on or after December 8, 2004, and shortened the refund schedule from five years to three.
- Older loans. The fact sheet lists legacy windows for loans endorsed before that date: no refund after year seven for loans closed before January 1, 2001, and none after year five for loans closed on or after it. Few borrowers hold those loans now, but they show the window depends on the old loan’s endorsement date.
- Assumed loans. When an FHA loan is assumed, the insurance stays in force and the seller gets no refund. The owner when the insurance terminates is entitled to any refund.
- Default. The fact sheet lists not having defaulted on your mortgage payments among the refund eligibility conditions.
- Refund after payoff. HUD describes a separate refund process for eligible homeowners, by Treasury check or form HUD-27050-B. That is not the cash-out credit.
What Should You Check Before Closing?
Ask for the Refinance Credit Query printout. It shows the projected closing date, months insured and the unearned premium. Then compare it with the new loan’s upfront premium line on your Loan Estimate and later on the Closing Disclosure. The credit should show as a reduction in that premium, either in the financed amount or in the cash due.
Questions worth asking in writing:
- Is my old loan FHA-insured, and what is its case number?
- What closing date did you use for the credit?
- Is the new premium financed in full or paid in cash?
- What happens to the credit if my closing date moves?
Misreads are common. People expect a check. People assume the monthly premium comes back too. They don’t. Others believe a switch to conventional returns the upfront premium. It does not. And some assume the credit is large no matter when they close. It isn’t.
Should You Wait or Refinance Now?
This is a real judgment call. The credit loses value every month, so closing sooner inside the window keeps more of it. But a cash-out is a large decision, and a small premium credit should not be what drives it. The same goes for waiting: a borrower sitting near month 36 loses the credit entirely, but that alone rarely justifies a refinance that does not otherwise make sense.
Think of it like this. Picture a homeowner in month 20 of an FHA loan who needs equity for a repair project and meets the 12-month ownership and occupancy test. The credit is real but partial. Now picture a second homeowner in month 38. No credit, same cash-out math otherwise. The second one is not disqualified, just paying the full new premium.
Check the program rules as well, since HUD updates its handbook. HUD’s Handbook 4000.1 page is the authoritative policy source for the premium and cash-out sections, and the figures here are subject to lender guidelines. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Key Terms Defined
Upfront premium: The one-time FHA mortgage insurance charge, a percentage of the base loan, usually financed into the loan.
Annual premium: The recurring FHA mortgage insurance charge billed monthly; it is not refunded in a refinance.
Refinance credit: The unearned part of the old upfront premium, applied against the new loan’s upfront premium.
Base loan amount: The loan amount before the financed upfront premium is added.
Case number: The HUD identifier assigned to an FHA loan, used to look up the credit.
Frequently Asked Questions
Do I get a check for the old upfront premium?
No. The credit reduces the upfront premium on your new FHA loan. It lowers the financed amount or the cash due at closing. A separate HUD refund process exists for eligible homeowners after payoff, but that is not the cash-out credit.
Is the monthly mortgage insurance refunded or credited too?
No. The credit concerns the upfront premium only. The annual premium on the new loan is set by its own term, loan amount and LTV, and a lower starting balance has only a small downstream effect on it.
What if my old loan was conventional or VA?
There is no prior FHA premium, so there is nothing to credit. The new FHA loan carries its full upfront premium. The same is true if you refinance an FHA loan into a conventional one.
Does the credit make it easier to qualify for cash-out?
No. Cash-out eligibility turns on LTV, credit, payment history and occupancy. The credit only reduces one cost on the new loan. Subject to lender guidelines, the program reaches 80% LTV on a home owned and occupied for 12 months before the case number.
Who applies for the credit?
The lender does. It runs HUD’s Refinance Credit Query using the old case number and the projected closing date. You can ask to see the printout and then confirm the reduction on your Loan Estimate and Closing Disclosure.
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’s piece FHA Cash-Out Upfront Mortgage Insurance and Refund Rules goes deeper on the premium side. Nothing here is a commitment to lend.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. HUD FHA Homeowners Fact Sheet on Refunds
2. HUD FHA Connection Refinance Credit Query field descriptions
3. FHA News and Views, UFMIP refunds reader question
4. HUD OIG, HUD’s Oversight of FHA Refunds
5. HUD Handbook 4000.1 information page
This article is part of Lendmire’s FHA Loan series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: How to Plan Your Exit From MIP After an FHA Cash-Out · How a Low Appraisal Limits an FHA Cash-Out at the Cap · How Long Does an FHA Cash-Out at the Cap Carry MIP?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.