The Quick Read: No. An FHA cash-out on a condo tops out at 80% of the home’s appraised value, and every lien that stays on the unit counts toward that 80%. A second mortgage or HELOC does not lift the ceiling. It uses up room inside it. Condo status decides whether the building qualifies, not how high you can borrow.
The Cap Counts Every Lien, Not Just the First
The cap is measured on total debt. Say a condo appraises at 100% of value. The new FHA first mortgage plus any second lien that remains must add up to 80% or less.
Lenders call that combined number the CLTV, short for combined loan-to-value. It adds the new first mortgage and every surviving lien, then divides by the value.
Here is the mini-picture. Suppose a surviving second lien takes up 10 percentage points of value. The new first mortgage can use only about 70 points. The second lien did not add borrowing power. It took a seat at the same table.
The FHA cash-out reaches 80% on a home you have owned and occupied for 12 months before the case number is assigned. Compare that with a purchase, which reaches 96.5% with a 3.5% minimum investment. Cash-out is a tighter box because you are pulling equity out, not putting a down payment in. The details are on Lendmire’s FHA cash-out refinance program page.
Two more points about the ceiling:
- It is a cap on total debt, not a promise of cash. The cash you receive is what is left after paying off the old loans and covering costs.
- The cap applies even when a second-lien holder is perfectly willing to sign off. Subordination approval cannot create headroom that the cap does not have.
Lendmire’s piece Can an FHA Cash-Out Go Above Its Cap With a Subordinate Lien? covers the same rule for any home type.
Key Terms Defined
CLTV (combined loan-to-value): The new first mortgage plus every other lien that stays, divided by the home’s value.
Adjusted Value: The appraised value after FHA’s own adjustments. The cap is measured against this number.
Subordinate lien: Any loan that sits behind the first mortgage in repayment order, such as a home equity loan or HELOC.
Subordination agreement: A signed document where the second-lien holder agrees to stay behind the new first mortgage.
HELOC: A home equity line of credit. You can draw on it up to a set limit, repay, and draw again.
Single-Unit Approval: A path for insuring a loan on one condo unit when the building is not on the FHA approved list.
Which Liens Count Against the Cap?
Any lien that sits on the condo when the loan closes counts. The table shows how common situations play out. Treat the lender’s file review as the final word.
| Lien situation | Counts toward the 80%? | What it means |
|---|---|---|
| Existing second, kept | Yes | Shrinks the new first mortgage |
| Existing second, paid off at closing | No, it is gone | Payoff comes out of your cash |
| New second on the condo at closing | Yes | Uses room, never adds it |
| HELOC with a zero balance | Generally yes, at full limit | Idle line still takes room |
| Association or special assessment lien | Yes, if it stays on the unit | Raise it with the lender early |
The HELOC row catches people. Lenders generally count the full available line, not what you have drawn. A big unused credit line can eat a large share of your room while you owe nothing on it. If you want the cash from the first mortgage, you usually need to close or reduce the line and document it.
A Worked Example in Percentages
Run the numbers on a condo with a first mortgage at 60% of value and a second lien at 10%. Your total debt today is 70%. You want cash.
Option one: pay off both liens in the new loan. The new first mortgage can reach 80%. Pay off the 70% in existing debt, and the gross cash is about 10 points of value. The second lien is gone.
Option two: keep the second lien. The new first mortgage is limited because the existing second lien takes up part of the available leverage. Pay off the old first mortgage and the gross cash is again about 10 points of value. The second lien stays in place.
Same ceiling, same gross cash. The real difference is whether you keep the second lien and its separate payment. Closing costs come out of your cash either way, so the net is smaller than 10 points.
The failing case. You ask for a new first mortgage at 80% and keep the 10% second. Total debt is 90%. The file fails. Paying off the second, shrinking the first, or closing the line fixes it.
Keeping the Second Lien: Subordination, Step by Step
If you want to keep a second lien, the holder has to agree to stay behind the new loan. Here is how it usually runs.
1. The lender asks the second-lien holder for a subordination agreement. Expect to supply the note and deed of the second financing too.
2. The second-lien holder reviews its own position. It looks at the new first mortgage amount, your credit and the combined debt.
3. If approved, the holder signs. The new FHA first mortgage then takes first position.
4. The lender sizes the new first mortgage so total debt stays at or below 80%.
This adds a coordination step with a party who does not work for your lender. Plan for that.
If the holder says no, you have a short list of moves:
- Pay off the second lien inside the new loan, which shrinks your cash.
- Ask for less cash so the first mortgage is smaller.
- Pay the second down with your own savings.
- Skip the refinance and keep what you have.
A bigger cash request can make the holder’s decision harder. That is one more reason to size the new loan to the cap before you ask anyone to sign.
Condo-Specific Gates
Condo status changes eligibility, not the cap. The 80% is the general cash-out limit for a primary residence, and it applies to your unit as it would to a house.
What the condo does add is a project check. HUD’s FHA Connection condo help says a condominium project must be approved before applications for FHA insurance can be processed for individual units. Approval comes through HUD review or lender review.
Approvals do not last forever. They expire three years after placement on the approved list and need recertification. A building whose status lapsed will not support a new FHA case.
If the building is not on the list, Single-Unit Approval may still work. HUD’s FHA condominium page describes it as available for a project that is complete, has at least five dwelling units, and meets a subset of project requirements. Those include FHA insurance concentration, owner-occupancy percentage and financial condition. HUD’s help page says the lender submits Form HUD-9991 when the case number is requested. The same page gives concentration limits of 10% for projects with ten or more units, and two FHA-insured units for smaller projects. That page is older, so the lender confirms the current numbers.
Timing matters. The project or unit approval needs to be settled before the appraisal is ordered and before you ask anyone to subordinate. Surprises on the building side are not fixed by a bigger second lien.
Streamline is not a workaround. An FHA Streamline refinances an existing FHA loan with no appraisal, a limited credit review and a net tangible benefit. It pays no cash out, and the 80% cash-out cap is not what governs it. It follows separate rules. If the building is neither approved nor eligible for Single-Unit Approval, a cash-out is off the table, though a streamline on an existing FHA loan may still be an option. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
HOA costs count. Association dues are part of your housing expense in the qualifying math. A special assessment can also strain the file.
What Else Decides the Outcome
Staying under 80% is necessary. It is not sufficient. Across the wholesale programs Lendmire places FHA files with, the same few things decide most cash-out files:
- Appraised value. It sets the base for every percentage above.
- Each lien’s balance and credit limit. Lenders look at the limit on a HELOC, not just the draw.
- Payment history. Payments on the mortgages on the property should be current.
- Ratios. The base pair is 31/43, meaning housing to total debt as a share of income. Documented compensating factors can reach 40/50 at the top tier. An automated finding governs most files. Payments on every lien, plus HOA dues, go into those ratios.
- Occupancy. The condo must be your principal residence, and it must have been for 12 months.
The loan also has to fit under the FHA limit for your county. The first mortgage plus all subordinate liens cannot exceed it. County loan limits apply, and they change every year.
Mortgage insurance is part of the picture. Across these programs, the upfront premium is 1.75% of the base loan and is financed. 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 at or below 90% LTV, it ends after eleven years. Cash-out at 80% sits in that lower band. Every figure here is subject to lender guidelines and full file review.
When the Answer Is No: Pick by Goal
If you need more cash than 80% allows, FHA cash-out is not the tool. Here is how the choices line up.
| Your goal | Likely fit |
|---|---|
| Cash up to 80% total debt, one payment | FHA cash-out, pay off the second |
| Keep a low-cost second lien | FHA cash-out, smaller first mortgage |
| More cash than 80% allows | A separate home equity loan or HELOC |
| Lower payment, no cash out | FHA Streamline, if the loan is FHA |
| Building not FHA-eligible | A different loan type |
A home equity loan or HELOC sits behind your first mortgage as a second lien. That is a separate loan outside the FHA transaction, with its own qualification.
Outdated Advice to Ignore
Older web pages still say the cap is 85%. They were right once. HUD Mortgagee Letter 2019-11 cut the maximum LTV and CLTV on cash-out refinances from 85% to 80% of the Adjusted Value. HUD said the change responded to risk to the FHA insurance fund from growing balances on cash-out loans. Hawaiian Home Lands loans are excluded.
Older rules were also looser on existing second liens. Mortgagee Letter 2009-08 let an existing second stay in place if re-subordinated, regardless of total indebtedness or CLTV. That was under the 85% cap and is superseded. Treat it as history.
For current files, use the cash-out section of HUD’s Handbook 4000.1 and let the lender confirm the exact text. If a page tells you a second mortgage gets you past the cap, check its age first.
Frequently Asked Questions
Can a new second mortgage let me borrow more than 80% on an FHA condo cash-out?
No. A new second lien that sits on the condo at closing counts toward the same combined limit as the first mortgage. The lender looks at total debt against the appraised value, so a second lien uses room and never adds it.
Does a HELOC I have never used still matter?
Generally yes. Lenders usually count the full available credit limit, not the drawn balance. Closing or reducing the line, with documentation, frees up room.
Is the cap higher for a condo than for a house?
No. The condo’s project status decides whether the loan is eligible, but the 80% is the general cash-out cap for a primary residence.
Can I refinance a condo that is not on the FHA approved list?
Possibly, through Single-Unit Approval, if the building meets the criteria. An FHA Streamline on an existing FHA loan follows separate rules and pays no cash out. Ask the lender to check the building before you order anything.
If my combined debt is under 80%, am I approved?
No. The appraisal, your credit, your income ratios, your payment history and the building’s status all still matter. Staying under the cap only clears one hurdle.
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. Share your lien balances and any HELOC limit up front, and the comparison gets much cleaner. Program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Before you chase a bigger number, check the building’s approval status and your lien stack. On a condo, those two items decide more than any clever structure does.
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.
For the program’s current guidelines, see FHA loan programs.
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References
1. HUD FHA Connection condo help
2. HUD FHA condominium project recertification FAQ
4. HUD Mortgagee Letter 2019-11
5. HUD Mortgagee Letter 2009-08
6. HUD Housing Handbooks (Handbook 4000.1)
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: Can You Get an FHA Cash-Out on a Condo in Litigation? · FHA Cash-Out Approval Requirements for a Condo Unit · FHA Cash-Out Lien Requirements for Leased Solar Panels
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.