How Much an FHA Cash-Out Lends After a Listing With a Low Mortgage

The Quick Read: The ceiling is 80% of the home’s appraised Adjusted Value, and that cap covers the whole new loan, not just the cash you receive. Your old payoff and any financed costs come out of that room. The financed upfront premium also reduces your net cash. A low existing mortgage leaves more room under the cap, but a recent listing can add lender-level waiting rules on top.

What Is an FHA Cash-Out Refinance?

An FHA cash-out refinance replaces your current mortgage with a new, larger FHA-insured loan and pays you the difference. It is for a home you live in. It is not a second lien, and it is not a product for rentals or second homes.

Across the wholesale programs Lendmire places files with, the FHA cash-out reaches 80% of Adjusted Value on a home owned and occupied for 12 months before the case number. Every figure here is subject to lender guidelines and full file review, and none of it is a commitment to lend.

Key Terms Defined

• Adjusted Value: the appraised value after FHA’s adjustments, and the number the 80% cap is measured against.
• LTV (loan-to-value): the new loan divided by the home’s value.
• CLTV (combined loan-to-value): all liens on the home added together, divided by value.
• Base loan amount: the loan before the financed upfront premium is added. The premium is calculated on this figure.
• Upfront mortgage insurance premium (MIP): a one-time premium calculated on the base loan, usually financed into the balance. Confirm current premium amounts with your lender or a qualified professional.
• Annual MIP: an ongoing premium that varies with term, loan amount and LTV.
• Seasoning: the time you must hold or occupy the home, or the time since a listing ended, before a lender will take the file.

How the Maximum Loan Is Calculated

The ceiling is 80% of Adjusted Value. HUD Mortgagee Letter 2019-11 set the maximum LTV and the maximum combined LTV on cash-out refinances at 80 percent of the Adjusted Value, for case numbers assigned on or after September 1, 2019. HUD explained the move in its press release on the cash-out cap: FHA lowered the maximum from 85 percent to 80 percent to reduce risk in cash-out lending.

Old guides that say 85% or higher are stale. That is the easiest way to spot an outdated page.

County loan limits also apply to FHA loans. They are set by county and change every year, so a high-value home in a high-cost county can meet a second ceiling. Whichever limit is lower controls the loan.

The Cash Worksheet, Line by Line

Here is the arithmetic, in words. Work it in this order:

1. Start with the appraised Adjusted Value. That is the number the lender uses, not the list price and not your own estimate.

2. Take 80% of it. That is the largest the new loan can be, subject to the county loan limit.

3. Subtract the payoff of your current mortgage. This includes interest owed through payoff.

4. Subtract financed closing costs. Anything rolled into the loan uses up room and reduces your cash.

5. Account for the financed upfront premium. It is 1.75% of the base loan and is financed into the balance, so it reduces your net cash. The 80% cap covers the whole new loan, so the financed premium sits inside that room.

6. What remains is your cash. Any costs you pay out of pocket instead of financing leave more room.

You do not have to borrow the maximum. A smaller loan means a smaller balance, less financed premium and a lower base for the annual premium.

What a Low Mortgage Does and Doesn’t Change

A low balance gives you more room under the cap. It does not raise the cap. Picture a home with a very small mortgage left on it: the payoff line in the worksheet is tiny, so a large share of the 80% becomes cash. Now picture the same home with a mid-sized balance. The cap is identical, but far less is left after the payoff.

Two limits still bind with a low balance. First, the 80% line is hard. A homeowner with 100% equity cannot take 100% out. Second, the CFPB notes that with a cash-out refinance, lenders typically require you to keep at least 10% to 20% of your home value as equity. For FHA, the 80% cap is that requirement.

The trade-off is real. Replacing a low-balance first mortgage means a new loan amount, a new rate and a new term. The CFPB guide adds that a cash-out refinance may extend the time to pay off your mortgage and your monthly payment may rise because you replace your mortgage with a larger loan. If you only need a modest sum, a separate second lien keeps the first mortgage in place. Under FHA rules, a second lien that stays counts toward CLTV, and the 80% CLTV limit applies.

What a Recent Listing Does to the File

A recent listing can slow a cash-out file. In a home you listed and then took off the market, three things can come into play.

Lender rules. HUD does not set a delisting period for an FHA cash-out in the figures given here, so any waiting period after a listing is a lender overlay. Some lenders want the listing cancelled or expired. Some want additional time after that. The wait differs lender to lender, so ask early.

For contrast only, conventional loans have a stated rule. Fannie Mae’s Selling Guide says properties listed for sale must be taken off the market on or before the disbursement date of the new loan. That is a conventional rule, a different program, and it does not set the FHA answer.

Ownership and occupancy. FHA cash-out is built around a home you owned and occupied for 12 months before the case number. Limited exceptions exist, such as for inherited homes, and those are worth confirming against the current HUD handbook, Handbook 4000.1. Appreciation does not shorten the period.

The appraisal. A full appraisal sets the Adjusted Value. A recent listing leaves a list price on record, and an appraiser may compare it to the appraised value. If the appraisal lands below the old list price, the 80% cap moves down with it, and so does your cash. Plan the worksheet on a conservative value.

Timing is the risk to watch. Get the lender’s listing policy in writing before ordering the appraisal.

Where the General Rule Breaks

• Hawaiian Home Lands (Section 247). A law-firm summary of the HUD letter says the 80% change does not apply to these mortgages. HUD’s own letter is the primary source.
• Streamline refinances. These apply to existing FHA loans and carry no cash-out. No appraisal is required, and a net tangible benefit test applies.
• High-cost counties. The county loan limit can bind before the 80% line does.
• Inherited homes. The occupancy rule is treated differently for heirs. Confirm with the lender before assuming either way.
• Investment and second homes. FHA cash-out is a primary-residence product. Occupancy decides the leverage.
• Lower-than-expected appraisal. The cap falls with the value, and the cash shrinks faster than the value does, because the payoff and costs are fixed.

Comparing the Refinance Paths by Cash Received

The rate-and-term reaches 97.75% on a principal residence occupied for the previous twelve months, but it pays you nothing beyond closing costs. Leverage and cash are separate questions.

What the Borrower’s Decision Looks Like

Run a few checks before applying.

1. Does the 80% cap leave enough? Do the worksheet with a conservative value. If the cash is thin, a smaller product may fit better.

2. Does the trade-off make sense? Giving up a low-balance first mortgage for a larger, longer loan raises the monthly cost. Annual MIP is part of that cost, and on a thirty-year loan with higher leverage it lasts for the term. At lower leverage it ends after eleven years. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.

3. Does the timing clear? Occupancy, listing history and the lender’s overlay all have to line up, alongside credit.

On credit, the wholesale programs Lendmire places FHA loans with start at a 580 decision score. Ratios run from a base of 31/43, and documented compensating factors can reach 40/50 at the top tier. Where a bankruptcy or foreclosure is in the history, HUD’s own waiting periods apply: two years from a chapter 7 discharge and three years from a foreclosure. These are HUD rules, not a promise from the network.

Common mistakes:

• Quoting an 85% cap from an old guide.
• Treating 80% as the cash you receive.
• Skipping the lender’s listing policy.
• Ignoring the financed premium in the worksheet.
• Assuming a refund of the old premium comes back as cash. It does not.

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

As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. HUD Mortgagee Letter 2019-11

2. HUD press release on the cash-out cap

3. CFPB, Using home equity to meet financial needs

4. Fannie Mae Selling Guide, cash-out refinance transactions

5. HUD Handbook 4000.1