The Quick Read: Usually less than the equity you see on paper. The new loan stops at 80% of the home’s appraised value, and your payoff and closing costs come out of that. A home you bought within the last year typically has nothing to cash out yet, because you must have owned and lived in it for 12 months. If you plan to keep the old house and buy the next one with FHA too, you need a named exception.
How Is the Cash Calculated?
The cash is the new loan ceiling minus what you owe, minus costs. That is the whole formula. Everything else here is a detail about one of those three pieces.
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.
Across the wholesale programs Lendmire places FHA files with, the cash-out ceiling is 80% loan-to-value (LTV), meaning the loan can be at most 80% of the home’s value. The mechanics look like this:
1. The appraisal sets the value.
2. The lender takes 80% of that value as the ceiling.
3. The new loan pays off your current mortgage and any other liens first.
4. Closing costs and prepaids come out next.
5. What remains is yours.
Notice what the 80% is not. It is not 80% of your equity. It is 80% of the home’s value. A homeowner with a small mortgage gets a lot of room under the ceiling. A homeowner who put 3.5% down a few years ago gets very little. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
A Worked Example in Percentages
Say a home appraises at 100% of value, and you owe 55% of that value. These are modeled assumptions, not market data.
| Step | Share of home value |
|---|---|
| New loan ceiling | 80% |
| Minus current payoff | 55% |
| Gross room | 25% |
| Minus costs and prepaids | A few percentage points |
| Cash in hand | Gross room less those costs |
The gross room is not your cash. The costs and prepaids shrink it. The upfront mortgage insurance premium is typically financed into the balance, so it raises what you owe rather than showing up as a bill at the table. The lender’s closing figures show exactly how each piece is handled on your file.
Now flip the case. Owe 78% of value, and the gross room is 2%. Costs can eat that entire amount, which means a cash-out loan may leave you with nothing to spend.
Does an Appraisal Change the Answer?
Yes, more than almost anything else. The 80% test runs against the value after the appraisal and the program’s adjustments. A lower appraisal shrinks the ceiling and the cash together.
Because the ceiling is 80% of the appraised value, a home that appraises 5% lower cuts the ceiling by 4% of the original value. That sounds small until you compare it with the gross room in the example above. On a thin-equity file, a small appraisal miss decides whether the cash-out makes sense at all.
Any second liens also count against the 80%. A home equity line of credit typically counts at its full available limit, not just the drawn balance. Ask your loan officer how a line you rarely use is treated.
Why a Recently Purchased Home Usually Has No Cash to Give
A standard FHA cash-out requires that at least one borrower owned and lived in the home as a principal residence for 12 months before the case number is assigned. The case number is the file identifier the lender pulls to start the loan. The payments on the mortgage being refinanced also have to be on time.
That rule is where this strategy often breaks for people who just moved in. If you bought recently, a cash-out is generally off the table. A no-cash-out refinance is a different product with a different leverage ceiling, but it cannot hand you money for the next home.
The 80% cap itself is a HUD policy change that cut the old 85% limit. The cut was meant to strengthen equity and reduce losses after cash-out loans grew sharply. Some older web pages still show the 85% figure. Ignore them.
Here is the timing trap people miss. The cash-out has to happen while the old home is your occupied principal residence. If you move out first and refinance later, proving the occupancy history gets harder. Refinance first, then move.
What Else Shrinks the Cash?
Three things shrink the cash besides the payoff, and a fourth raises the balance without taking cash from you on day one.
- Closing costs and prepaids. Prepaids are the taxes and insurance the lender collects up front to start your escrow account. They come out of your proceeds.
- The annual premium. It is a monthly cost between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV. On a thirty-year loan above 90% LTV, it lasts the full term. At or below 90% LTV, it ends after 11 years. HUD publishes the full schedule in Mortgagee Letter 2023-05.
- County loan limits. FHA limits are set by county and change every year. If your home is in a high-value area and your equity is large, the limit can cut the cash short. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
- The upfront premium (balance, not cash). The 1.75% charge is financed, so the balance rises even though no extra cash leaves your pocket on day one.
The CFPB says a cash-out refinance replaces your mortgage with a larger loan, so your payment may rise and your payoff may stretch out. It also says lenders typically want you to keep 10% to 20% of the home’s value as equity. FHA’s own cushion is 20%, matching the 80% ceiling.
The Big Trap: Keeping the Old FHA Home
This is where many plans fall apart. After a cash-out with FHA, your old home carries an FHA-insured mortgage. HUD’s policy is generally to insure one principal-residence mortgage per borrower at a time.
So what happens if you want to keep the old house and buy the new one with an FHA purchase loan? You need one of a few named exceptions. The older HUD text, Handbook 4155.1, listed four:
- An employment-related relocation, with the new home a significant distance away.
- An increase in the number of legal dependents.
- Vacating a jointly owned property.
- A non-occupying co-borrower.
That older handbook has since been replaced by Handbook 4000.1. The family-size exception, for example, can carry its own equity test.
Wanting to be a landlord is not an exception. Neither is simply liking the old house.
If no exception applies, you have two clean paths. Sell or pay off the first FHA loan, then use FHA again. Or buy the new home with a different program, since the one-loan rule belongs to FHA. Conventional financing is the usual alternative. Ask your loan officer to compare both options before you refinance.
Can You Still Qualify for the New Home With Two Payments?
Often the answer depends on your income and debts, and this is a point where underwriting looks closely. If you keep the old home, the purchase lender counts both mortgage payments against your income. Rental income from the old home only helps if the lender is allowed to count it, and that depends on the loan program and your documentation.
Across the programs Lendmire places FHA files with, the base debt ratios are 31/43. That means housing costs at 31% of income and total debts at 43%, with no compensating factors. Documented compensating factors, such as strong reserves or a high credit score, can push those as high as 40/50 for the strongest files.
Remember that the cash-out loan is larger than your old one. Its payment replaces the old payment, and it can be higher. That higher payment then sits in your ratios when the next lender reviews you. A non-occupant co-borrower’s income generally cannot be used to help you qualify on the cash-out itself.
Putting the Cash to Work: Sequence and Timing
Refinance first, buy second. That is the order that works, because the cash does not exist until the cash-out loan closes.
Once the money is in your account, it can go toward your down payment, closing costs and reserves on the next home. Reserves are the cash left after closing that shows you can cover payments if income dips. On an FHA purchase, the program reaches 96.5% financing with a 3.5% minimum investment at a decision score of 580 or higher. The 3.5% is measured against the lesser of the price or the appraised value.
The purchase lender will want to see where the money came from. A recent deposit from a cash-out closing is easy to document when the refinance paperwork is on file. Keep your closing statement.
Can a streamline or a rate-and-term refinance fund a purchase? No. A streamline refinances an existing FHA loan with no appraisal and a limited credit review, and it must show a net tangible benefit. A rate-and-term refinance reaches 97.75% on a principal residence you have occupied for the previous 12 months, but its proceeds are limited to paying off the existing debt and costs. Only a cash-out puts equity in your hands.
If you are weighing what the money is for, the CFPB’s research on cash-out borrowers found that paying off debts was the most common reason. Because this plan involves two loans in sequence, your loan officer should map it carefully.
When the Cash Falls Short: Other Ways to Fund the Next Home
A cash-out is one tool. Compare it with the others before you commit.
| Option | How it works | Watch for |
|---|---|---|
| FHA cash-out | One new first mortgage | 80% cap, 12-month wait |
| Home equity line | Second lien on old home | Counts at full limit |
| Home equity loan | Fixed second lien | Adds a payment |
| Conventional cash-out | New first mortgage | Own guidelines apply |
| Sale proceeds | Sell old home first | Timing gap to bridge |
A cash-out replaces your first mortgage with one new loan. A home equity line or loan leaves your first mortgage alone and adds a second lien on top of it. That can matter if your current loan has terms you want to keep.
Selling the old home is the cleanest route when you do not want two payments. The tradeoff is timing. You may need a place to live between closings, or a purchase contract with a flexible closing date.
What Does a Lender Look For on This File?
Expect these questions from your loan officer on a plan like this:
- Have you owned and lived in the home for 12 months?
- Is the payment history on your current mortgage on time?
- What is the likely appraised value, and what do you owe?
- Do you have other liens or a home equity line open?
- Will you keep the home, rent it or sell it?
- Can you qualify on the new home with both payments, or only one?
Credit counts too. Across the wholesale programs Lendmire places FHA files with, the starting point is a decision score of 580. Some lenders set a higher floor on cash-out. HUD’s waiting periods after credit events, such as two years from a Chapter 7 discharge or three years from a foreclosure, are HUD rules, not a promise from any one lender.
Key Terms Defined
Adjusted value: The appraised value after HUD’s adjustments. The 80% test runs against it.
CLTV (combined loan-to-value): Your first mortgage plus any other liens, divided by the home’s value. On an FHA cash-out, that combined figure is also held to 80%.
Cash-out refinance: A new mortgage that pays off the old one and gives you the leftover as cash. The proceeds are not limited to specific purposes.
Rate-and-term refinance: A refinance limited to paying off the old loan and costs. It puts no equity in your hands.
Prepaids: Taxes, insurance and similar items the lender collects up front to start your escrow account.
Seasoning: The waiting period before a loan or ownership history counts. Here, it means 12 months of owning and living in the home.
Weighing Your Options
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. Bring your estimated home value, your payoff and your plan for the old house. Those three facts decide most of the answer. Program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Frequently Asked Questions
Can I use FHA cash-out money as the down payment on my next home?
Yes, if the refinance closes first and the cash is documented. The purchase lender will trace the deposit to your closing statement. The new purchase still has to pass its own underwriting, including both payments if you keep the old home.
Is the 80% limit based on my equity or my home’s value?
Your home’s value. The loan can be 80% of the appraised value, and your payoff and costs come out of that number. Owing a little means plenty of room. Owing a lot means almost none.
Can I cash out right after I buy a house?
Generally no. A standard FHA cash-out needs at least one borrower to have owned and lived in the home for 12 months before the case number is assigned. If you bought recently, the equity may not be reachable through this program.
Can I keep my old home and buy another with FHA?
Only under a named exception, such as an employment relocation or a growing family. Wanting to rent out the old house does not count. Without an exception, you can buy the new home with a non-FHA program or sell the old home first.
Do closing costs reduce the cash I receive?
Yes. Closing costs and prepaids come out of your proceeds. The upfront mortgage insurance premium is typically financed, so it raises your loan balance instead of reducing the cash at the table. Your Loan Estimate and Closing Disclosure show how each item is handled.
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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References
1. HUD Mortgagee Letter 2019-11
2. HUD Mortgagee Letter 2023-05
3. CFPB Using Home Equity guide
5. HUD Housing Handbooks index (Handbook 4000.1)
6. CFPB’s research on cash-out borrowers
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 on a Recently Bought Home? · How Much Cash Comes Out of an FHA Cash-Out Refinance Twice in a Row?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.