The Quick Read: you can roll closing costs into an FHA cash-out loan, but the money has to fit under the same loan-to-value ceiling as everything else. Each financed fee takes room away from your cash. The fee also adds interest and mortgage insurance cost for as long as you keep the loan. Think of financing fees as a way to avoid paying cash at the table, not as a way to borrow more.
What Is an FHA Cash-Out Refinance?
An FHA cash-out refinance replaces your current mortgage with a new FHA-insured loan that is larger than what you owe. The new loan pays off the old one, covers any costs you choose to finance, and sends the leftover cash to you. You end up with one mortgage and one payment.
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.
The main limit is leverage. Across the wholesale programs I place FHA files with, a cash-out reaches 80% of the home’s value. You must have owned and lived in the home as your principal residence for 12 months before the case number is assigned. Every figure here is subject to lender guidelines and a full file review, and none of it is a commitment to lend.
Here is the part most people miss. The 80% ceiling covers the whole base loan. It does not stop at the payoff and the cash.
What Counts as “Fees” in an FHA Cash-Out?
Four buckets of money can end up inside your loan balance:
- Closing costs. These are the third-party and lender charges that come with any refinance, such as the appraisal, title work and recording.
- Prepaids and escrow deposits. These are upfront amounts for items like homeowners insurance and property taxes.
- The upfront mortgage insurance premium. On FHA loans this is 1.75% of the base loan, and it is financed into the loan.
- Your payoff. This is not a fee, but it competes for the same space under the ceiling.
You can also pay some or all of the closing costs and prepaids out of pocket. The Loan Estimate and the Closing Disclosure itemize each charge, so you can see which ones sit inside the loan.
How Does the Loan Get Built, Step by Step?
The loan is built from the top down, starting with the value and ending with your cash. Here is the sequence I walk borrowers through.
1. Eligibility. The home must be your principal residence, and you must have owned and lived in it for 12 months. Your mortgage payments for the previous 12 months must be clean. A home you own free and clear can still be refinanced as a cash-out, and HUD Mortgagee Letter 2020-30 confirms both the 12-month payment history and the free-and-clear point.
2. Value. An FHA appraisal sets the value. The 80% cap applies to HUD’s adjusted value, so the number the loan is sized on is not always the raw appraisal figure.
3. Maximum base loan. Take 80% of that value. This is the most the base loan can be, and county loan limits apply on top of it.
4. Subtract the payoff. Every lien being paid off comes out first, including the old first mortgage and any home equity loan or line you are rolling in.
5. Subtract financed costs. Any closing costs and prepaids you choose to finance come out next.
6. What remains is your cash. That number is the cash-out amount.
7. Add the upfront premium. If you finance the 1.75% premium, it is figured on the base loan and added on top of it.
That is the order. Fees never sit outside the cap, so financing them does not create new borrowing room. It spends room you already had.
What Does the Math Look Like When Fees Are Financed?
Run the numbers in percentages of the home’s value, because that is how the cap works. This is an illustration only, not an offer. Assume a home worth 100 units, a payoff equal to 55% of value, and closing costs and prepaids equal to 3% of value.
| Item | Fees financed | Fees paid in cash |
|---|---|---|
| Base loan, % of value | 80.0% | 77.0% |
| Payoff, % of value | 55.0% | 55.0% |
| Closing costs and prepaids | 3.0% (inside loan) | 3.0% (from pocket) |
| Cash to you, % of value | 22.0% | 22.0% |
| Upfront premium (1.75% of base) | about 1.4% of value | about 1.35% of value |
| Total balance, % of value | about 81.4% | about 78.35% |
Both borrowers walk away with the same cash. The difference is what each one owes afterward. The borrower who financed the fees owes roughly three percentage points more of the home’s value. That larger balance carries interest for the full term. The annual mortgage insurance premium is also figured on a larger loan.
Now flip it. Say you want the maximum possible cash and you finance everything. Your cash drops by every point of cost you finance. A borrower who needs a fixed amount of cash for a goal can hit a wall here. The numbers cover the payoff and the fees, and the cash that remains is smaller than the goal.
How Does Financing Fees Change Your Monthly Budget?
A bigger balance means a bigger payment. That is true of the interest portion, and it is true of the mortgage insurance portion.
FHA loans carry two insurance charges. The upfront premium, 1.75% of the base loan, is typically financed. The annual premium is spread across your monthly payments, and across the programs I place files with it runs between 0.15% and 0.75% of the balance. Where you land depends on the loan term, the loan amount and the loan-to-value. HUD publishes the full schedule in Mortgagee Letter 2023-05, and the base loan amount decides which tier you fall into.
On a thirty-year loan with leverage above the program’s threshold, the annual premium lasts for the whole term. At or below that threshold, it ends after eleven years. A cash-out sits at 80% at most, so the shorter duration is the usual outcome on a thirty-year loan. That is a program fact, not a quote, and your lender confirms the tier on your file. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
The payment also feeds your qualifying ratios. Lenders compare your housing payment, and then your total monthly debts, to your income. The base pair is 31/43 (housing and total). With documented compensating factors, such as strong reserves or a long job history, the limits can reach 40/50 at the top tier. Financing more fees adds to the payment and tightens those ratios, which matters if you are near the line.
When Is It Better to Pay Fees in Cash?
There is no universal answer, so here is how the tradeoff reads.
Financing makes sense when:
- You are short on cash at the table and the refinance still pays for itself.
- The cash you receive stays above what your goal requires.
- You expect to keep the loan a short time, so extra interest has less time to build.
Paying in cash makes sense when:
- You have savings you would otherwise leave idle, and you plan to keep the loan for years.
- Your ratios are tight and a smaller balance helps them.
- The cash you need is close to the most the cap allows, so every financed point would shrink it.
Financing costs more over time, while paying costs more today. The cheaper path depends on how long you keep the loan, which is the one number nobody knows at closing.
A third option sits in between. You can finance part of the costs and pay the rest.
Where Does the General Rule Break?
The 80% ceiling and the 12-month tests cover most files. A handful of situations bend them.
A recent purchase. If you bought the home inside the last 12 months, you generally fail the ownership and occupancy test. You cannot pull cash out of a house you just bought.
A short payment history. The record has to be clean. Lender summaries describe a tiered view of this test, where very short histories do not qualify and longer ones need every payment on time. I would verify the exact version against HUD’s rule before counting on it.
A second home or rental. The standard FHA cash-out is for a principal residence only. Occupancy decides the leverage, so a second home or rental does not fit this program.
A paid-off home. Free-and-clear homes still count as cash-out, which surprises people. Your payoff is zero, so more of the 80% becomes cash and fees.
A non-occupant co-borrower. Their income generally cannot be counted toward qualifying on a cash-out. That is a lender-level overlay, so ask before you assume it works.
An FHA loan you already have. If your current loan is FHA and fairly new, you may be eligible for a partial refund of the upfront premium. That is a general FHA rule, and the refund shrinks with time. HUD’s guidance is the place to confirm it.
Special occupancy cases. Inherited homes and divorce buyouts can follow special rules. Treat them as “special rules may apply” until a lender reviews the file.
Past credit events. HUD’s waiting periods are two years from a Chapter 7 discharge and three years from a foreclosure. Those are HUD rules, not a promise from any network. Your credit score also has to clear the lender’s floor. The wholesale programs I use start at a 580 decision score, and some lenders set a higher bar.
Hawaiian Homelands loans. These mortgages were exempted when HUD cut the cash-out ceiling from 85% to 80%. It applies to a small group of borrowers.
How Do Cash-Out, Rate-and-Term and Streamline Handle Fees?
The three refinance types treat leverage and cash very differently, and mixing them up causes a lot of confusion.
| Factor | Cash-out | Rate-and-term | Streamline |
|---|---|---|---|
| Max leverage | 80% LTV | 97.75% (primary home) | Existing FHA loan only |
| Cash to you | Yes | No | No |
| Appraisal | Yes | Yes | None |
| Rolling costs in | Within the 80% cap | Within the cap | Third-party costs generally not |
A streamline refinances an existing FHA loan with no appraisal, a limited credit review and a net tangible benefit test. The premium carries over. Lenders generally do not let you wrap third-party closing costs into a streamline balance, though the upfront premium can still be financed.
The rate-and-term version reaches 97.75% on a principal residence you have occupied for the previous twelve months. It does not give you cash, so the leverage is much higher. If you do not need cash, ask whether one of these two fits better.
What Can Go Wrong With the Cash?
Most people reach for a cash-out to settle other debt. Paying off a card at a high rate with a lower-cost mortgage can help your monthly budget. But you are converting unsecured debt into debt secured by your house.
The risk is the habit that follows. If the cards fill back up, you now carry both. Fees financed into the loan make this worse, because you are paying interest on closing costs for the life of the loan, on top of the debt you consolidated.
What Happens After You Sign?
On a refinance of your primary home, you generally have three business days after closing to cancel. Saturdays count as business days. Sundays and legal public holidays do not. The CFPB’s explanation of the right of rescission spells it out. If you cancel, you still owe your original loan.
In practice, the lender holds your cash until that window has passed. The old loan is paid off first, the closing costs are paid next, and what remains is released to you. That sequence is why the Closing Disclosure shows the payoff and the financed fees as line items before the cash to you.
Key Terms Defined
Base loan: The loan amount before the financed upfront premium is added. The 80% cap is applied to this number, and HUD uses it to set the annual premium tier.
Total loan: The base loan plus the financed upfront premium. This is the balance you actually owe.
Financed fees: Closing costs and prepaids that are added to the loan balance instead of paid at closing.
Net cash: What you receive after the payoff, the financed fees and the premium are accounted for.
Adjusted value: The home value HUD uses to size the loan, which is not always the raw appraisal figure.
Upfront mortgage insurance premium: A one-time FHA charge of 1.75% of the base loan, usually financed.
Frequently Asked Questions
Can I roll closing costs into an FHA cash-out loan?
Often yes, subject to lender guidelines. The costs have to fit under the 80% ceiling along with your payoff. Every financed dollar reduces your cash dollar for dollar, and it adds interest over the life of the loan.
Does the financed upfront premium count against the 80% limit?
The cap is applied to the base loan, and the financed 1.75% premium is added on top of it. That is how files are structured across the programs I place. Your lender confirms how it treats the premium on your file, because the Handbook language is detailed.
Can I get cash out if I own my home free and clear?
Yes, and it still counts as a cash-out refinance. With no payoff to cover, more of the 80% is available for cash and any financed fees. You still need to meet the 12-month ownership and occupancy test.
How much does financing fees cost me over time?
It depends on how long you keep the loan. The financed amount gets interest every month, and the annual mortgage insurance premium is figured on the larger balance. A short hold costs little extra, while a long hold costs more than paying in cash would have.
Can I cancel after I sign?
Yes, for a primary-residence refinance you generally have three business days. If the required disclosures were not delivered correctly, the right can last longer, up to three years. Cancelling means your old loan stays in place.
Where Does This Leave You?
Start with the cash you need, then work backward. Take 80% of the value, subtract your payoff, and see what is left before any fees. If the leftover cash covers your goal with room to spare, financing the costs is a convenience. If the leftover cash is thin, paying fees from savings may be the only way the plan works.
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 is a mortgage broker, so it arranges these loans through wholesale lenders rather than lending directly.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. HUD Mortgagee Letter 2020-30
2. HUD Mortgagee Letter 2023-05
3. CFPB: Right of rescission on a refinance
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 Upfront MIP Gets Added to an FHA Cash-Out on an Existing FHA Loan · How an FHA Cash-Out Works With a Non-Borrowing Spouse · How the FHA Cash-Out Seasoning Period Works for an Heir
Brandon Miller
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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.