The Quick Read: Usually less than 80% of your home’s value, and often a lot less. The new loan can reach 80% of the appraised value. The cash you receive is what is left of that 80% after your old mortgage is paid off and the costs and upfront insurance premium are covered. The new loan also starts a fresh 30-year term, so the payoff date moves out, even if your current loan is years along.
What Does “Restarting the Clock” Actually Mean?
A cash-out refinance does not add a second loan. It is a brand-new first mortgage that pays off the old one. Everything resets: the term, the amortization schedule and the mortgage insurance timeline.
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.
Amortization is the schedule that splits each payment between interest and principal. Early in a loan, most of each payment goes to interest. Early in a new loan, the same thing happens again.
Picture a homeowner eight years into a 30-year loan. She has 22 years left. If she refinances into a new 30-year term, she has 30 years left. That adds eight years to the payoff date. She is back in the interest-heavy stretch of the schedule, even though she has been paying for years.
The extra years are the hidden cost. They are separate from the cash you take out. A lower or similar payment can feel like a win while the total interest over the life of the loan goes up.
How Is the Cash Calculated?
Cash equals the new maximum loan minus everything that has to be paid first. That is the whole formula. The order matters, because each step shrinks what you walk away with.
1. Start with the appraised value. An appraiser sets this number, and everything else hangs on it.
2. Multiply by the program’s maximum cash-out LTV. The FHA cash-out program caps the loan at a set LTV (loan-to-value, meaning the loan as a percentage of the home’s value). That is your maximum new loan. The remainder stays as equity in the home.
3. Subtract your payoff. The new loan must pay off your existing first mortgage. Any other liens that have to be cleared come out here too.
4. Subtract costs. Closing costs, prepaid items and escrow funding come next, unless you pay them out of pocket.
5. Account for the upfront premium. FHA charges an upfront mortgage insurance premium of 1.75% of the base loan. Most borrowers finance it, so it eats into the cash.
6. What remains is your cash.
The lender confirms the exact treatment of the financed premium inside the 80% test on your file. Lendmire’s FHA loans run through wholesale programs, so ask for that treatment early, because it moves the number.
A Worked Example in Percentages
Here is an illustration in percentages of value. It is not a quote, and every input is an assumption.
| Line item | Share of home value |
|---|---|
| Appraised value | 100% |
| Maximum new loan (80% cap) | 80% |
| Assumed existing mortgage payoff | 55% |
| Room before costs | 25% |
| Closing costs, prepaids, escrows, upfront premium | Reduce the 25% |
So a homeowner with a mortgage balance near 55% of value starts with 25 points of room. Costs and the upfront premium then take a slice of those 25 points. What lands in the bank is smaller than the headline gap. Costs vary by loan, lender and location, so no single percentage fits everyone.
A homeowner with a higher balance, say 70% of value, has only 10 points of room before costs. The same costs take a bigger bite out of that smaller gap.
An Appraisal Surprise Works Backward
A low appraisal cuts the cash directly. Every point of value you lose reduces the 80% cap, but your payoff does not shrink. The gap narrows from the top. An appraisal shortfall can undo an early estimate quickly, so treat any early number as a range.
Who Can Use This Program?
FHA cash-out is for a home you live in. The key rule is the 12-month test: you must have owned the home and lived in it as your principal residence for the 12 months before the FHA case number is assigned. A case number is the file identifier the lender pulls to start an FHA loan.
That rule rules out recent buyers. If you bought the home last spring, this product is not available yet, even if the home has gained value. FHA’s rate-and-term refinance and Streamline have different seasoning rules.
A few more points on eligibility:
- Occupancy decides leverage. A second home or a rental does not get the 80% FHA cash-out, because the program is built around a principal residence.
- You do not need an FHA loan now. Any existing mortgage can be paid off with an FHA cash-out, and so can a home owned free and clear.
- Payment history counts. A clean recent record on the current mortgage is expected. The exact late-payment tolerance sits in the handbook and in lender overlays.
- Credit and income get a full review. Across the files Lendmire arranges, wholesale programs start at a 580 decision score for FHA. Some lenders set higher floors than that.
- Ratios apply. The base pair is 31/43 (housing cost and total debt as a percentage of income) with no compensating factors. Documented compensating factors can raise that as far as 40/50 for the strongest files. Automated findings govern most files.
County loan limits apply to the loan amount, and they change every year. The lender checks yours.
What Does the Mortgage Insurance Do to the Math?
Mortgage insurance on this loan does not disappear when you reach 80% equity. That surprises people who know conventional loans, where private mortgage insurance usually drops off as equity builds.
FHA has two parts:
- Upfront premium. This is 1.75% of the base loan, usually financed into the balance.
- Annual premium. This ranges from 0.15% to 0.75% of the balance depending on term, loan amount and LTV. It is billed monthly with the payment.
Duration depends on the LTV band. On a 30-year loan with a high LTV, the annual premium lasts the whole term. At or below 90%, it ends after 11 years. A cash-out refinance is capped at 80%, so it lands in the shorter band, and the annual premium ends after 11 years. Even so, 11 years of insurance on a brand-new loan is a real cost to weigh. The premium schedule comes from HUD Mortgagee Letter 2023-05, and the lender’s Loan Estimate shows how it applies to your file. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
How Much Does the 30-Year Restart Cost You?
The restart costs you extra years of interest, and whether it pays off depends on what the cash does for you. The cash is not free. You are borrowing it against a longer timeline.
Several things add up:
- More months of interest. You pay on a larger balance for a longer stretch.
- More front-loaded interest. A new schedule pushes you back to the early years, when each payment is mostly interest.
- A new insurance clock. The annual premium starts over on the new base loan.
Here is how the term choices compare, in plain terms:
| Choice | Payoff date | Monthly payment | Total interest |
|---|---|---|---|
| Keep the current loan | Unchanged | Unchanged | Lowest of the three |
| New 30-year term | Pushed out by years already paid | Lower per dollar borrowed | Highest |
| New shorter term | Can land near or before today’s date | Higher | In between |
A shorter term can take the same cash without adding years. The tradeoff is a bigger monthly payment, and your debt ratios have to absorb it.
A Simple Break-Even Test
Ask these questions before you take the maximum:
1. What will the cash do? Paying off high-interest debt is a different case from a purchase that loses value.
2. How many years does the restart add to your payoff date?
3. Could you offset that by paying extra principal on the new loan? Extra principal brings the balance down faster and shortens the real payoff date. Nothing forces you to use the full 30 years.
4. Is there a cheaper way to get the same cash, such as a different product?
If you cannot answer the first question with something concrete, take less cash or skip the refinance.
How Much Is Smart to Take?
The maximum is a ceiling, not a target. Taking less leaves more equity, which is a cushion if values dip. The loan also needs at least 20% equity left by rule, and you give up more of it each time you cash out. Many borrowers pick a number tied to a specific need, then stop.
What Do Borrowers Actually Do With the Cash?
Borrowers use cash-out proceeds for a range of purposes. According to CFPB research on cash-out refinances, paying off other debt and covering closing costs are among the uses. The same research cautions that added costs can be substantial.
Debt payoff is the use that most often makes sense. But moving unsecured debt onto your home means the debt is now backed by the house. If the old debts creep back up, you carry both.
Where Do Closing Costs Fit?
Closing costs come out of your proceeds, or you pay them separately. The CFPB’s Closing Disclosure explainer notes that “Cash to Close” is a different number from total closing costs. It also warns that rolling costs into the loan lowers what you pay up front but adds interest over time.
You get a Loan Estimate when you apply and a Closing Disclosure before you sign. Compare the two. Look at the cash-to-borrower line and the costs listed, not just the monthly payment. Costs differ by lender and location, and there is no official percentage to rely on.
Edge Cases That Change the Answer
- Inherited property. Inherited homes may be treated differently from the usual 12-month rule, and the lender confirms how on your file. If you rent the home out instead of living in it, it is no longer a principal residence and does not qualify for this program.
- Manufactured homes. These generally must have been permanently installed on a site for more than 12 months before the case number is assigned.
- A home owned free and clear. Eligible, because the program covers pulling equity from a home with no mortgage.
- State rules. State law can add requirements to cash-out loans beyond the federal ones.
- Handbook updates. The program rules live in HUD Handbook 4000.1, which HUD revises periodically. The 80% cap applies to case numbers assigned on or after September 1, 2019. Before that date, the cap was 85%. Check the current version for any change.
- Combined liens. The cap counts all liens together, so a second mortgage or other lien on the home counts toward the 80%. This is called CLTV, or combined loan-to-value.
When a Different Product Fits Better
Here is the honest comparison. These are mechanics, not pitches.
| If you want… | Consider |
|---|---|
| Lower payment on an existing FHA loan, no cash | FHA Streamline (no appraisal, limited credit review, net tangible benefit required) |
| Change the rate or term, no cash | FHA rate-and-term (reaches 97.75% on a principal residence occupied for the previous twelve months) |
| Cash and keep the current first mortgage | A second lien such as a home equity loan or line |
| Cash with a higher credit profile and strong equity | Conventional cash-out |
An FHA Streamline continues the premium and requires a net tangible benefit. It will not hand you cash. A second lien keeps your current first mortgage intact, which matters if the first mortgage is a good one. A conventional cash-out may shed insurance sooner for borrowers with strong credit and equity, but it asks more of the file.
There is no universal winner. The right answer depends on what you hold now, what you need and how long you plan to stay in the home.
Common Mistakes in the Cash Estimate
- Treating 80% of value as cash. The 80% is the whole new loan. Your payoff comes out first.
- Forgetting the financed premium. The 1.75% upfront premium rolls into the balance and shrinks your net.
- Counting on a high appraisal. Build the estimate on a range, not a hope.
- Ignoring other liens. A second mortgage or lien has to be paid off or counted.
- Assuming a recent purchase qualifies. The 12-month occupancy test comes first.
- Comparing payments, not total cost. A smaller payment on a longer term can hide a bigger total.
Key Terms Defined
Cash-out refinance: A new mortgage that pays off your old one and sends you the extra equity as cash.
LTV (loan-to-value): The loan balance as a percentage of the home’s appraised value.
CLTV (combined loan-to-value): All liens on the home added together, as a percentage of value.
Amortization: The payment schedule that splits each payment between interest and principal over the loan term.
Upfront mortgage insurance premium: A one-time FHA charge of 1.75% of the base loan, usually financed.
Case number: The FHA file identifier assigned to start a loan, which fixes the 12-month look-back.
Frequently Asked Questions
How much cash can I actually get from an FHA cash-out refinance?
It depends on the appraisal and your payoff. The new loan is capped at 80% of appraised value. Subtract your existing mortgage, other required liens, closing costs and the financed upfront premium. What is left is your cash. Ask the lender for a range, since a lower appraisal reduces it directly.
Does the 30-year clock really restart?
Yes, if you choose a new 30-year term. The cash-out loan is a brand-new first mortgage, so the term and amortization schedule begin again. If you are eight years into your current loan, a new 30-year term adds eight years to your payoff date. A shorter term avoids that, with a higher payment.
Can I do an FHA cash-out if my current loan is not FHA?
Yes. Any existing mortgage can be paid off with an FHA cash-out refinance, and so can a home owned free and clear. You still need to meet the 12-month ownership and occupancy test, and the loan is subject to lender guidelines and full file review.
Does FHA mortgage insurance go away once I reach 20% equity?
Not by itself. On a thirty-year FHA loan at or below the program’s lower leverage band, the annual premium ends after 11 years. Above that band it lasts for the term. Because cash-out loans are capped at 80%, they fall in the shorter band, but the premium still runs for years. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Are cash-out proceeds taxable?
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
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. As a mortgage broker licensed for consumer lending in 16 states, Lendmire arranges FHA, VA, conventional and jumbo loans through wholesale lenders. Program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend. Bring your payoff balance and a realistic value range, and decide the cash number from your need, not from the cap.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. 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 2023-05
2. CFPB – Cash-Out Refinances and Paydown Behavior of Non-Mortgage Debt Balances
3. CFPB – Closing Disclosure explainer
4. HUD Handbook 4000.1 (Update 18)
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 Much Cash Comes Out of an FHA Cash-Out Refinance to Pay College Tuition? · How to Plan and Use an FHA Cash-Out Refinance to Go Fixed · How Lenders Underwrite an FHA Cash-Out Refinance When the Appraisal Comes Back Low
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.