The Quick Read: Usually up to about 80% of your home’s appraised value, minus closing costs and the financed upfront mortgage insurance premium. Nothing gets paid off, so almost the whole new loan turns into cash. Your county’s FHA loan limit can lower the number, and a low appraisal shrinks it directly. Everything here is subject to lender guidelines and full file review.
What does “cash-out” mean when there’s nothing to pay off?
On a typical cash-out refinance, the new loan pays off your old mortgage first. You keep the leftover. On a home you own outright, the payoff is zero. The new loan becomes a brand-new first lien on a house that had none.
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.
HUD allows this. Its seasoning guidance in Mortgagee Letter 2020-30 treats a property owned free and clear as eligible for a cash-out refinance. A paid-off home counts. It just has a very simple payoff line.
Lendmire is a mortgage broker, so it arranges these loans through wholesale lenders and does not lend itself.
The formula, in words
Here is the whole calculation:
1. Start with the appraised value, adjusted under HUD’s formula (HUD calls this the “Adjusted Value”).
2. Multiply by 80%. That is the ceiling on the new loan.
3. Subtract the payoff of any existing mortgage. For you, that is zero.
4. Subtract closing costs you choose to finance.
5. Subtract the upfront mortgage insurance premium if it is rolled into the loan.
6. What remains is your approximate cash.
The 80% cap comes from HUD Mortgagee Letter 2019-11. It cut the maximum loan-to-value (LTV) on FHA cash-out loans from 85% to 80%. LTV is the loan amount divided by the home’s value. The letter also applies the limit to combined LTV, so any other lien on the home counts toward the cap.
Two things to notice. The cap is on the loan, not on the cash. And the premium and costs come out of the same ceiling before a dollar reaches you.
Why your check is smaller than 80% of your value
Think of the 80% ceiling as a bucket. Several things draw from it before you do.
| What draws from the bucket | Effect on your cash |
|---|---|
| Financed closing costs | Reduces cash dollar for dollar |
| Upfront mortgage insurance premium | Financed into the loan, so it reduces cash |
| Low appraisal | Shrinks the bucket itself |
| County loan limit | Can cap the loan below 80% |
| Any lien found at title search | Gets paid off first |
The upfront premium on an FHA loan is 1.75% of the base loan, and it is usually financed. There is also an annual premium, between 0.15% and 0.75% of the balance depending on term, loan amount and LTV. Those are program mechanics, not a quote. On a thirty-year loan with a higher LTV, the annual premium lasts for the full term, while at a lower LTV it ends after eleven years. A cash-out at the 80% ceiling sits on the lower-LTV side of that line.
Paying costs out of pocket instead of financing them leaves more cash from the loan. It also means bringing money to the table, which defeats the purpose for many people. Your Loan Estimate shows what is financed. The CFPB’s Your Home Loan Toolkit explains how the “Closing Costs Financed” line works and how the Closing Disclosure shows final figures.
A walkthrough in percentages
Skip dollar amounts and think in shares of your value. Say you own a home outright and the appraisal supports your expected value. The maximum loan is 80% of that figure. Subtract financed costs and the financed premium, which together take a modest slice of the loan. What is left, call it the high-70s as a share of value, lands in your account.
Now run a low appraisal. If the appraiser comes in 5% under your expectation, the 80% ceiling drops with it. The costs barely change, so they eat a larger share of a smaller loan. A small miss in value becomes a bigger miss in cash. That is why a pre-appraisal gut check matters.
In practice, the cash you receive is the loan ceiling minus financed costs and the financed premium. Setting that expectation early avoids a disappointing closing table.
Does the county loan limit ever bind?
For most borrowers, the 80% test binds first. FHA loan limits, however, are set by county and change every year, so county loan limits apply. On a higher-value home in a lower-limit county, the limit can cap the new loan below 80% of value. HUD publishes a county lookup, and your loan officer can check it against your property and unit count.
Eligibility: what the lender checks
- Primary residence only. Cash-out is for the home you live in. Second homes and rentals do not qualify under this program.
- Twelve months of ownership and occupancy. The FHA cash-out program generally requires that you owned and occupied the home for 12 months before the case number is assigned. Buying a house with cash last month doesn’t start you at the finish line.
- Credit. The programs Lendmire works with start at a 580 decision score. Some lenders set higher floors.
- Income and debt ratios. This is a full-documentation loan. The base ratio pair is 31/43 (housing to total income), and documented compensating factors can reach 40/50 at the top tier. The automated underwriting finding governs most files.
- Property. One to four units are allowed. HUD’s archived refinance reference guide says three- and four-unit properties must pass a self-sufficiency test and keep reserves. It is archived, so current requirements come from your lender.
- Co-borrowers. Income from a non-occupant co-borrower generally can’t be used to qualify on a cash-out. A co-signer is not a fix here.
Payment history, a big topic on most cash-outs, is moot for a truly paid-off home. HUD’s 2020 letter ties the payment-history review to properties with mortgages. Your proof is documentation of ownership and occupancy.
Special situations
Bought with cash recently. Free and clear, yes. But the 12-month owned-and-occupied test still generally applies. Some websites claim a shorter window. Treat that as something to confirm with a loan officer, not a loophole.
Inherited home. HUD’s archived guide allows cash-out on a property inherited within the last 12 months, if you have lived in it as your primary residence since the inheritance. Because that guidance is archived, it needs confirmation against current rules. A home you rent out after inheriting generally has to be occupied before it qualifies.
Manufactured homes. Extra restrictions apply. Ask early.
“Paid off” that isn’t. An old second mortgage, tax lien or judgment can show up in the title search. Anything found gets paid from the loan first, which changes both your eligibility and your cash.
FHA Streamline. Not an option here. It refinances an existing FHA loan, so a home with no mortgage has nothing to streamline.
The part nobody budgets for: a payment comes back
You currently have no principal-and-interest payment. After the refinance, you will have one, plus mortgage insurance, plus taxes and insurance. The CFPB’s guide to using home equity notes that a cash-out refinance replaces your loan with a larger one, which can raise your payment and lengthen your payoff time.
That is payment shock for someone who had none. Your debt ratios have to absorb it, and so does your monthly budget.
The CFPB report on cash-out refinance borrowers is worth reading before you decide what the cash is for. Converting unsecured debt into debt secured by your house only helps if the habits change.
FHA cash-out vs. the alternatives on a paid-off home
| Option | What it does | Leaves first lien intact? |
|---|---|---|
| FHA cash-out refinance | New first mortgage up to 80% LTV | Creates a new one |
| Conventional cash-out | New first mortgage, different guidelines | Creates a new one |
| Home equity loan | Fixed second loan on top | Yes, nothing to leave |
| HELOC | Revolving line against equity | Yes, nothing to leave |
With no existing mortgage, the “replaces your loan” drawback of a cash-out softens. You are not giving up an old loan. You are adding a first lien to a debt-free house. A home equity loan or HELOC would also add a lien, as a second one, and the CFPB’s research blog explains how those leave a first mortgage untouched. FHA tends to suit borrowers whose credit or ratios fit its flexibility better than other products. A conventional loan can fit stronger-credit borrowers. It’s a genuine toss-up that depends on your file.
Key Terms Defined
Adjusted Value: HUD’s version of your home’s appraised value, used to run the 80% test.
LTV (loan-to-value): The loan amount divided by the home’s value.
CLTV (combined LTV): Total of all liens on the home divided by its value.
Free and clear: Owned with no mortgage or other lien against it.
Upfront mortgage insurance premium: An FHA charge of 1.75% of the base loan, usually financed into the loan.
Seasoning: The waiting period a program wants you to own or occupy a home before refinancing.
Steps from here
1. Confirm you meet the 12-month ownership and occupancy test.
2. Run a title check to confirm nothing else is recorded against the property.
3. Decide what the cash is for and how much you truly need.
4. Compare programs, since a bigger loan means a bigger payment.
5. Review your Loan Estimate carefully. It shows what is financed and what you receive.
If you are weighing a cash-out refinance on a home you own outright, Lendmire can help you compare the programs and the equity each one reaches. Call 828-256-2183 or request a quote.
Frequently Asked Questions
Can I get an FHA cash-out refinance if I have never had an FHA loan?
Yes. Cash-out does not require an existing FHA loan. That requirement belongs to the FHA Streamline, a different product. You qualify as a new FHA borrower, with full documentation of credit, income and occupancy, subject to lender guidelines.
Can I take out 100% of my equity?
No. FHA caps the new loan at 80% of Adjusted Value, a 2019 HUD mortgagee letter. Older pages still show 85%, which is outdated. Closing costs and the financed premium reduce your cash further.
Does a paid-off home skip the waiting period?
Not generally. The 12-month owned-and-occupied test still applies to standard FHA cash-out. The payment-history test applies to properties with mortgages, so it does not apply to you. Confirm the details against current HUD guidance with your loan officer.
What if my appraisal comes in low?
Your cash drops with it. The 80% ceiling is calculated on the appraised figure, and costs stay roughly the same. A modest appraisal miss can produce a larger percentage miss in cash.
Will a county loan limit reduce my cash?
Sometimes. County loan limits apply and vary by county and unit count. For most homes the 80% test binds first. On higher-value homes in lower-limit counties, the limit can cap the loan lower.
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. HUD Mortgagee Letter 2020-30
2. HUD Mortgagee Letter 2019-11
3. CFPB Your Home Loan Toolkit
4. HUD Archives: Refinances reference guide
5. CFPB: Using home equity guide
6. CFPB: CFPB Report Finds Cash Out Mortgage Refinance Borrowers Improve Credit Scores
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 to Plan and Use an FHA Cash-Out Refinance to Go Fixed · How Much Cash Comes Out of an FHA Cash-Out Refinance to Pay College Tuition? · Banks That Offer an FHA Cash-Out Refinance When Your Current Mortgage Is an FHA Loan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.