The Quick Read: A home held in a revocable living trust can generally go through an FHA cash-out, but the trust only holds title. The lender underwrites you, the person: your credit, your income, your occupancy. The loan tops out at 80% of the appraised value, and in an expensive county the county loan limit can cap the amount before the equity does. All of this is subject to lender guidelines and full file review.
How Does an FHA Cash-Out Refinance Work?
An FHA cash-out replaces your current mortgage with a new FHA-insured loan that is larger than the payoff. The difference comes to you as cash after the old loan, closing costs and the upfront premium are covered. Across the wholesale programs Lendmire places files with, the FHA cash-out is capped at 80% LTV on a home you have owned and lived in for the 12 months before the case number is assigned. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
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 80% cap is a HUD rule. HUD Mortgagee Letter 2019-11 lowered the maximum loan-to-value and combined loan-to-value on cash-out refinances to 80 percent of adjusted value. Before that, the cap was 85 percent. HUD’s announcement of the change confirms the move from 85 to 80.
Two things follow from that cap.
- You keep at least 20% equity in the home.
- Everything comes out of the space under the cap before cash reaches you: the payoff, financed closing costs and the upfront premium.
A free-and-clear home can also be refinanced as a cash-out. Taking equity from a paid-off house is still cash-out, so the same 80% cap applies.
What Does the Living Trust Change?
The trust changes how title is held and what paperwork the file needs. It does not change who the borrower is.
The borrower is the person, not the trust. HUD’s Handbook 4000.1, the authoritative source for FHA Single Family policy, contemplates borrowers taking title in their own name or in a living trust, being obligated on the note, and signing the security instruments. Confirm the exact wording in the Handbook itself, because individual sections carry their own effective dates.
In practice, a trust-held file adds four items.
1. Proof the trust can borrow. The trust must authorize the trustee to mortgage the home. Lenders usually ask for a certification of trust or the full trust document.
2. A revocable trust. A revocable trust you control is the common, workable case. Irrevocable and unusual trusts get far more scrutiny and may not fit.
3. Title acceptance. The title company must be willing to insure the lender’s lien with title vested in the trustee.
4. Signatures in the right capacity. The trustee signs the security instrument. The individual borrowers, who are the people obligated on the loan, sign the note.
A caution on sources. Fannie Mae’s trust rules for conventional loans are a useful analogue: at least one person who set up the trust must occupy the home and sign the loan documents, and the title policy must show title vested in the trustee. Those are conventional rules, not FHA rules. FHA lenders often work in a similar way, but the specifics vary by lender and title company.
How Is the Loan Underwritten, Step by Step?
The sequence below is how a trust-held FHA cash-out typically runs. Trust paperwork is the part that most often needs extra time, so start it early.
1. Confirm the deed and the trust. The deed should be recorded in the trustee’s name. The trust must allow borrowing against the home.
2. Underwrite the person. The lender reviews your credit, income, debts and occupancy. The base ratio pair is 31/43 (housing to total debt). Documented compensating factors can reach 40/50 at the top tier, and the automated finding governs most files. Across the wholesale programs Lendmire places FHA loans with, the decision score starts at 580.
3. Order the case number and appraisal. The 12-month ownership and occupancy clock runs back from the case-number assignment. The appraisal sets the adjusted value, and the 80% cap applies to that figure.
4. Review title. The title company checks vesting, the trustee’s authority and any exceptions tied to the trust.
5. Size the loan. The maximum is 80% of adjusted value, and any second lien counts toward the same 80%. County loan limits apply as a separate ceiling.
6. Review disclosures. You receive a Loan Estimate, then a Closing Disclosure. The CFPB’s Loan Estimate explainer shows how to compare them line by line and where financed costs appear.
7. Sign in the correct capacity. Some lenders restrict powers of attorney on trust closings, so plan for signers to be present.
Where Do the 80% Cap and the County Limit Collide?
In a high-cost state, either one can bind first, and the lower of the two controls. That is a practical read of how the two ceilings work together.
FHA loan limits are set county by county and change every year. You can look yours up on HUD’s FHA mortgage limits lookup. County loan limits apply, and the right figure for your home is whatever that tool shows for your county.
Consider a home appraised well above the national floor, with a modest existing balance. The 80% cap leaves a lot of room, but the county limit may stop the loan first. Now consider a home with a large existing balance. The 80% cap may stop the loan well before the county limit matters. The first case is common in expensive coastal and resort counties. The second is common anywhere a recent purchase left little equity.
The practical step: run both numbers before you decide the cash-out is worth pursuing. The limit tells you the largest loan FHA will insure on the home. The cap tells you how much equity the program lets you reach. The smaller number is your ceiling.
Closing in the Trust or Deeding Out First?
Many borrowers ask whether they must move the home out of the trust before the refinance. Often they do not. The Handbook language points to a living trust as a permitted way to hold title, so a properly drafted revocable trust can stay in place.
| Approach | What it means | Friction |
|---|---|---|
| Close in the trust | Trustee signs the security instrument | Trust review, title acceptance |
| Deed out, then back | Home retitled to you, then back after closing | Extra deeds, title and tax-record steps |
| Amend the trust first | Fix missing borrowing powers | Attorney involvement |
Whether a lender requires deeding out depends on the lender and the title company. If a lender asks for it, ask the title company whether re-deeding creates any issue. Check with the trust’s attorney before retitling anything.
Which Trust Types Fit?
| Trust type | General fit | Why |
|---|---|---|
| Revocable living trust | Usually workable | You keep control; the trustee can borrow |
| Irrevocable trust | Often difficult | You no longer control the asset |
| Land trust | Lender-dependent | Treatment varies by lender and title company |
Fit for any trust type is decided by the lender and the title company on your own file, so confirm it with them early.
Where Do Files Break Down?
Most trust-related snags come from paperwork, not from the trust itself.
- The trust does not clearly authorize borrowing. Older or short-form trusts sometimes lack the power. The usual fix is an amendment or a restated certification, handled with the trust’s attorney.
- The borrower does not live in the home. Standard cash-out is for an owner-occupied principal residence. One borrower must have owned and lived in the home for 12 months. No second homes.
- The occupancy clock has not run. A recent buyer may have to wait. Someone who inherited a home and rented it out may not be eligible until they have lived in it for 12 months. Confirm both points with the lender against the Handbook.
- Moving the home into the trust. Whether retitling resets any ownership or occupancy clock is a question for the lender. Do not assume either way.
- Title exceptions. The title company may raise exceptions tied to the trust. Clearing title before the appraisal is ordered saves rework.
- Signing logistics. Co-trustees, successor trustees and spouses each sign in their own capacity. Some states have community-property signing rules. Confirm these with an attorney.
What Does It Cost Month to Month?
An FHA cash-out carries an upfront premium of 1.75% of the base loan, which can be financed. HUD Mortgagee Letter 2023-05 sets that figure. The annual premium runs between 0.15% and 0.75% of the balance depending on term, loan amount and LTV. On a thirty-year loan with a higher LTV, it lasts for the term, while at a lower LTV it ends after eleven years. Because FHA cash-out loans are capped at a lower LTV than the threshold that triggers the full-term schedule, the eleven-year schedule is the one that generally applies.
A larger balance means a larger payment. The premium is a program fact, so compare it against the Loan Estimate for your own file.
Closing costs can be paid in cash, deducted from proceeds or added to the loan. The CFPB’s guide to the Loan Estimate and Closing Disclosure points to the “Closing Costs Financed” line as the place to see what was rolled in.
FHA mortgage insurance applies to the loan even though you keep 20% equity. A conventional cash-out at 80% generally avoids private mortgage insurance, so compare both products on your own numbers.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
What Does the Decision Look Like in Practice?
A few questions sort most borrowers quickly.
- Have you owned and lived in the home for 12 months?
- Does the trust authorize borrowing, and is it revocable?
- Which is smaller on your home, 80% of the appraised value or the county limit?
- After the payoff, the upfront premium and financed costs, is the net cash worth the larger balance?
- Would a different product fit better? An FHA rate-and-term refinance with an appraisal reaches 97.75% on a principal residence occupied for the prior twelve months. An FHA Streamline refinances an existing FHA loan with no appraisal and a net tangible benefit. Neither puts cash in your pocket the way a cash-out does.
Key Terms Defined
Adjusted value: The appraised value, adjusted under HUD rules, to which the 80% cap applies.
Certification of trust: A short document in which the trustee confirms the trust exists and states the trustee’s powers.
Trustee: The person or entity that holds legal title on behalf of the trust.
Vesting: The way title is held on the deed. For a trust, title is vested in the trustee.
Settlor: The person who created the trust and placed the home in it.
Case number: The FHA identifier assigned to the loan. The 12-month ownership and occupancy test runs back from it.
Frequently Asked Questions
Can I do an FHA cash-out if my home is in a revocable living trust?
Generally yes. HUD’s Handbook contemplates title held in your own name or in a living trust, and you qualify as the borrower. The lender and title company confirm the trust paperwork, and every parameter is subject to lender guidelines and full file review.
Do I have to live in the home?
Yes. Standard FHA cash-out is for an owner-occupied principal residence that one borrower has owned and occupied for the 12 months before the case number. Second homes and rentals do not fit this program.
How much cash can I take out?
Up to 80% of the adjusted value, less your payoff, any second lien that counts toward the cap, financed costs and the upfront premium. In a high-cost county, the county loan limit may stop the loan before the equity cap does. Check your county on HUD’s lookup tool.
Does moving my home into a trust affect eligibility?
No HUD source reviewed here says it resets ownership or occupancy. Ask the lender how it treats the time before the transfer, and check with an attorney before retitling.
What if my trust does not clearly allow borrowing?
The usual fix is an amendment or restated certification prepared with the trust’s attorney. Raise it before the appraisal so title review does not stall the file.
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.
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 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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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. HUD Mortgagee Letter 2019-11
2. HUD press release PR 19-114
5. Fannie Mae Selling Guide B2-2-05
7. HUD FHA mortgage limits lookup
8. HUD Mortgagee Letter 2023-05
9. CFPB TILA-RESPA guide to Loan Estimate and Closing Disclosure
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: Can a High-DTI Borrower Free Up Payment With an FHA Cash-Out? · How an FHA Cash-Out Works When Heirs Refuse to Sell · How an FHA Cash-Out Works on an Inherited Home for a Retiree
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.