The Quick Read: The lender replaces your current mortgage with a larger one and hands you the difference in cash. Before it does, it checks three things: that you live in the home, that the new loan fits under 80% of the appraised value, and that your credit and income can carry the bigger balance. You keep the house. The price is a larger balance and a new round of closing costs.
The Short Version
- The new loan pays off your current first mortgage and any liens being paid, then covers financed costs. Whatever room is left under the cap becomes your cash.
- The cap is 80% loan-to-value (LTV), the loan balance as a share of the home’s appraised value. It applies to the whole new loan, not just the cash.
- You must have owned and lived in the home as your main residence for 12 months before the FHA case number is assigned.
- Cash-out is a full-documentation loan with an appraisal. It is not a streamline.
- FHA charges an upfront mortgage insurance premium of 1.75% of the base loan, plus an annual premium. Both change what you net.
- Every figure here is subject to lender guidelines and full file review. Nothing is a commitment to lend.
What Is an FHA Cash-Out Refinance?
It is a new FHA-insured first mortgage that replaces your old one and pays you the leftover equity. The federal consumer-finance regulator describes a cash-out refinance as replacing your existing mortgage with a bigger one and giving you the difference in cash, often with closing costs attached.
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.
That is the “without selling” part. You turn some of your equity into spendable money and stay in the home. You pay for that with a higher balance, a reset loan, and mortgage insurance.
Your old loan does not have to be an FHA loan. A conventional or VA borrower can move into an FHA cash-out if the home qualifies. Lendmire is a mortgage broker. It arranges these loans through wholesale lenders and does not lend itself.
How Underwriting Works, Step by Step
Underwriting is the lender’s file review. Here is each step and what you do at it.
Step 1: The eligibility screen
The first question is whether the loan type fits you at all. Standard FHA cash-out is for a principal residence, the home you live in. At least one borrower must have owned and occupied it for the 12 months before the FHA case number. The case number is the identifier assigned when the lender orders the FHA file.
Note where the clock runs. It counts backward from case number assignment, not from your application date. A common slip is thinking the year starts when you apply.
Payment history is a separate test. The underwriter reviews how you have paid the mortgage you hold now. Late payments in the recent past can stop a cash-out file, even when the equity is there. Lenders vary on the exact window, so ask your loan officer for the specific test.
What you do: Pull your mortgage statements and confirm the move-in date and payment record.
Step 2: The appraisal and the adjusted value
Cash-out is appraisal-based. An appraiser values the home and reports its condition. The lender then works from an “Adjusted Value,” the figure the loan-to-value test is run against.
A low appraisal shrinks everything downstream. The cap applies to the appraisal, not to your estimate of what the house is worth. A condition problem the appraiser flags can also hold up the file until it is fixed.
What you do: Prepare the home, list recent upgrades, and be ready for repair items.
Step 3: The loan-size math
This is the step most borrowers misunderstand. The 80% cap covers the entire new loan, not just the cash. Everything has to fit under it:
- The payoff of your current first mortgage.
- Any other liens being paid off at closing.
- Financed closing costs and the upfront insurance premium.
- The cash you receive.
If you keep a second mortgage or home equity line in place, the combined loan-to-value (CLTV) includes it. The cap applies to that combined number too. The loan must also stay within the FHA limit for your county and unit count. County loan limits apply, and they change every year, so check HUD’s lookup tool for your county.
HUD set the 80% cap in Mortgagee Letter 2019-11. It applies to both LTV and CLTV, measured on Adjusted Value. HUD’s announcement said the move aligned FHA with the maximum cash-out LTV that Fannie Mae and Freddie Mac allow. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Here is a modeled example. These are assumptions for illustration, not market data, and every cost line varies by file.
| Line item | Share of Adjusted Value |
|---|---|
| Maximum new loan (the cap) | 80% |
| Payoff of current first mortgage | 60% |
| Financed costs and upfront premium | about 3% |
| Cash available to you | about 17% |
Change the payoff and the cash changes with it. An owner with a smaller balance has more room. Someone who bought or refinanced recently has less.
What you do: Get your payoff figure and ask the lender to work backward from the cap.
Step 4: Credit and capacity
Now the lender looks at you. It reviews credit, income, debts and assets. A manual underwrite is the fallback when the automated finding does not approve the file.
Across the wholesale programs Lendmire places FHA files with, the starting point is a decision score of 580. That is the score the underwriter works from, which can differ from the one you see in a free app. The base debt ratios are 31/43: housing costs up to 31% of gross income, and total monthly debts up to 43%. Documented compensating factors can stretch that, reaching 40/50 at the top tier. Compensating factors are strengths that offset a weak spot, such as steady employment history or savings left after closing.
Expect questions about what you are paying off. The CFPB found that cash-out borrowers often use proceeds to pay down other debts, especially credit card and auto loan balances. Underwriters know the pattern and look at what happened to those accounts.
What you do: Gather pay stubs, tax and bank documents, and a list of debts.
Step 5: Mortgage insurance
Every FHA loan carries two premiums. The upfront premium is 1.75% of the base loan, and it is usually financed, so it raises your balance. The annual premium runs between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV. It is billed monthly inside your payment.
How long it lasts depends on your loan. On a thirty-year loan at or below 80% LTV, the annual premium ends after eleven years. Above that level it lasts for the term. These are program facts, not prices.
What you do: Ask for the premium shown separately on the Loan Estimate.
Step 6: Decision, closing and what follows
The file ends in an approval, a counteroffer with a smaller loan, a request for more conditions, or a denial. Your lender must show every cost on the Loan Estimate and the Closing Disclosure. At closing, the new loan pays off the old one and you receive the balance. Because this is a refinance of your primary home, expect a short right-to-cancel window. The Closing Disclosure and your lender will explain how it works.
Why Files Shrink or Stall
Most cash-out surprises come from the same few places.
| What happens | Why | What you can do |
|---|---|---|
| Cash is smaller than expected | Appraisal came in lower | Review comparable sales with the lender |
| Cash is smaller than expected | Payoff or costs larger than assumed | Request an updated payoff and cost estimate |
| File stalls | Occupancy or payment history short | Wait until the history is clean, or look at other programs |
| Approval at a lower amount | Ratios too high | Pay down debt first, or document compensating factors |
| Condition repairs required | Appraiser flagged safety or soundness | Fix the item, then request a reinspection |
Where the General Rule Breaks
Owned less than 12 months. Standard cash-out is generally not available. An FHA rate-and-term refinance, which takes no cash, reaches 97.75% on a principal residence occupied for the previous twelve months. It cuts or swaps your loan without handing you equity. HUD’s Handbook 4000.1 is the governing policy document, and lender rules can be stricter than HUD’s.
Inherited homes. Treatment depends on whether you moved in. Guidance has shifted over time, so confirm the current Handbook with your loan officer before you assume an exemption applies.
Hawaiian Home Lands. Loans insured under Section 247 are treated under their own rules rather than the standard FHA cash-out limits, so confirm the current Handbook with your loan officer.
Rental or second home. Occupancy decides the leverage, and the FHA cash-out program is built for the home you live in.
Buying out a co-owner. This counts as cash-out only if you take extra cash beyond the buyout. Otherwise it is usually handled as a rate-and-term.
Free-and-clear homes. If you own the house outright and a refinance puts cash in your hand, it is cash-out. The same 80% cap and the same appraisal apply.
Streamline instead. The FHA Streamline refinances an existing FHA loan with no appraisal, a limited credit review and a net tangible benefit, and it gives no cash. It has its own seasoning rules.
Which Path Fits? Cash-Out Versus the Alternatives
| Option | What it does | Key tradeoff |
|---|---|---|
| FHA cash-out | New first loan, up to 80% LTV | Resets the loan, adds insurance |
| FHA rate-and-term | New first loan, no cash | Reaches higher LTV, no equity |
| FHA Streamline | Replaces FHA loan, no appraisal | No cash out |
| HELOC or home equity loan | Adds a second lien | Keeps your first loan intact |
| Selling | Converts the whole equity | You leave the home |
A HELOC leaves your existing first mortgage alone. A cash-out replaces it. If your current loan is a good one, adding a second lien can make more sense than replacing the first. If the first loan is the problem, cash-out can solve both at once. The best program for your situation depends on your balance, your equity, your credit and what the cash is for.
Veterans have a parallel route. Lendmire’s piece VA Cash-Out Refinance Requirements Without Selling the House covers it.
What It Costs You Over Time
The cash is not free money. A cash-out may extend your payoff time, and your monthly payment may go up because the new loan is larger, as the CFPB’s home equity guide notes. The financed premium adds to the balance. The annual premium adds to the monthly payment. The CFPB also asks borrowers to compare the new loan’s cost with the one they have today.
Debt consolidation deserves a hard look. Moving credit card debt into a mortgage lowers the monthly payment, but the debt is now secured by your home. Running those cards back up after the payoff leaves you with the new, larger mortgage and fresh card balances on top of it. The tool works best when the old balances stay at zero.
Pre-Application Checklist
- Confirm your move-in date and that the home has been your primary residence for the full 12 months.
- Pull 12 months of mortgage payment records.
- Get a current payoff figure for your first mortgage and any other liens.
- List your monthly debts and the balances you plan to pay off.
- Gather income documents and recent bank statements.
- Walk the home and note repairs an appraiser might flag.
- Decide what the cash is for and whether the added balance is worth it.
Key Terms Defined
Adjusted Value: the figure lenders use for the loan-to-value test, based on the appraisal.
Case number: the identifier assigned to your FHA file, which starts the occupancy clock count.
CLTV: combined loan-to-value, which adds any remaining second liens to the new first mortgage.
Compensating factors: documented strengths, such as savings or a stable job history, that offset higher debt ratios.
Mortgage insurance premium (MIP): FHA’s insurance charge, paid once upfront and again annually.
Principal residence: the home you live in as your main address.
Frequently Asked Questions
Can I borrow 80% of my home’s value in cash?
No. The 80% cap covers the whole new loan, including the payoff and financed costs. Your cash is only what remains under that limit. A home with a large existing balance may net little or nothing.
Do I need an existing FHA loan?
No. You can have a conventional, VA or other first mortgage and still refinance into an FHA cash-out. The Streamline is the product that requires an existing FHA loan.
Does a higher credit score get me more cash?
No. The cap is the same regardless of score. Credit affects whether you are approved and how the loan is priced, not the percentage of value you can reach.
Is an FHA cash-out the same as a HELOC?
No. A cash-out replaces your first mortgage with a new one. A HELOC or home equity loan is an added lien that sits behind your existing mortgage.
What happens if the appraisal comes in low?
The maximum loan falls with it, and your cash shrinks or disappears. You can ask the lender to review the comparable sales, or wait and reapply when the value supports your goal.
Weighing It
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.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. 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. CFPB: What other loans are similar to a HELOC
2. HUD Mortgagee Letter 2019-11
3. HUD press release on cash-out risk
4. CFPB: cash-out borrowers and credit scores
6. CFPB, Using Home Equity guide
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: FHA Cash-Out Refinance Requirements to Go Fixed
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.