The Quick Read: An FHA cash-out refinance replaces your current mortgage with a new fixed-rate FHA first mortgage and lets you take part of your equity as cash. The new loan reaches 80% of the home’s value, and that cap covers the old payoff, financed costs, and your cash together. Whether the plan works depends on the appraisal, 12 months of ownership and occupancy, and your payment history.
Going fixed is the goal. Cash is optional. Plan the loan around that order and the file stays simple.
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.
Which Refinance Actually Gets You to a Fixed Rate?
Three FHA refinance paths exist, and only one pays you cash. If your goal is to stop an adjustable rate from resetting, you may not need cash-out at all.
| Option | Cash to you | Appraisal | Fits when |
|---|---|---|---|
| FHA Streamline | No | None | Current loan is already FHA |
| FHA rate-and-term | No | Yes | You want fixed, no cash |
| FHA cash-out | Yes | Yes | You want fixed plus equity |
Across the wholesale programs Lendmire places FHA loans with, the Streamline refinances an existing FHA loan with no appraisal, a limited credit review, and a net tangible benefit. The FHA rate-and-term reaches 97.75% on a principal residence you have occupied for the previous twelve months. Cash-out stops at 80%. That gap is the price of taking money out.
So the first decision is blunt. No cash needed? Skip cash-out and use the higher-leverage path. Cash needed? Read on.
How Does an FHA Cash-Out Refinance Work?
The new loan pays off your existing mortgage and any liens you choose to clear. Whatever is left under the cap, after financed costs, comes to you. The new loan is a fixed-rate first mortgage, so principal and interest no longer reset.
Cash-out proceeds are not tied to a required purpose. Many borrowers use them for debt payoff or repairs, which the plan below covers.
The cap is a HUD rule. HUD Mortgagee Letter 2019-11 set the maximum loan-to-value and combined loan-to-value on cash-out refinances at 80%, measured against adjusted value. It took effect for case numbers assigned on or after September 1, 2019. The same letter notes FHA had last moved the cap in 2009, from 95% to 85%. The change would strengthen equity on cash-out loans and, per its press release, match the cash-out limit the GSEs allow.
Two points matter in practice. A second lien counts toward the same 80%. And an old rule you read online, 85% or 95%, is out of date.
Underwriting, Step by Step
Here is how a cash-out file moves, in the order the lender touches it.
1. Pick the purpose. Decide whether you want fixed only, or fixed plus cash. Write down a target cash amount and what it is for.
2. Check seasoning. The cash-out program reaches 80% LTV on a home you have owned and occupied for 12 months before the FHA case number is assigned. The case number date is the clock. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
3. Run the equity math. Start with the appraised value you expect and multiply it by 80%. Subtract your current payoff, any liens being cleared, and financed costs. What remains is the most cash available.
4. Apply and get a case number. The seasoning test and the cap both key off this date.
5. Appraisal. It sets value, and it checks condition against FHA property standards. Value drives both the cap and your cash, so the appraisal largely decides the outcome.
6. Underwriting. The lender verifies income, assets, credit, housing payment history, and the property. Lenders may add overlays beyond HUD’s minimums.
7. Disclosures. You receive a Loan Estimate first and a Closing Disclosure before you sign.
8. Closing and rescission. On a primary residence you generally get a three-business-day right to cancel. CFPB guidance says rescinding the new loan does not end your duty to keep paying the original one. Cash is normally held until that window ends.
9. Payoff and fixed result. The old loan is paid off and the new fixed-rate FHA loan begins. Taxes, homeowners insurance, and mortgage insurance can still change your total payment.
What the Lender Looks At
Across the wholesale programs Lendmire places FHA loans with, files start at a 580 decision score. HUD has a lower tier, but the network does not reach below 580. The ratio pair that needs no compensating factors is 31/43, housing to total debt. Documented compensating factors can reach 40/50 at the top tier, and the automated finding governs the file in most cases.
Payment history matters too. Lenders review your housing payment history, and recent late mortgage payments can hold up a cash-out file. Lenders may set their own limits, so a stricter lender can say no where another says yes.
Every figure here is subject to lender guidelines and full file review. None of it is a commitment to lend.
Mortgage Insurance: The Payment Driver People Underestimate
FHA charges an upfront premium of 1.75% of the base loan, usually financed into the balance. There is also an annual premium of 0.15% to 0.75% of the balance, depending on term, loan amount, and LTV. On a thirty-year loan above 90% LTV, the annual premium lasts for the term. At or below 90%, it ends after eleven years.
Cash-out loans cap at 80%, so the shorter duration applies on that side of the line. Still, the premium sits on a larger balance than your old loan did. HUD lowered annual premiums for most borrowers on loans endorsed on or after March 20, 2023. An existing borrower generally sees the lower premium only through a new endorsement, such as this refinance.
Keep the trade-off in mind: a fixed rate removes reset risk on principal and interest, but cash-out adds principal, and mortgage insurance applies to the bigger base. Both effects show up on your Loan Estimate.
Sizing the Cash When Fixed Is the Real Goal
Take the minimum, not the maximum. Every dollar of cash adds to the balance, to interest over time, and to the base mortgage insurance applies to. If the goal is stability, a smaller cash-out leaves more room under the 80% cap. That room absorbs a low appraisal.
Here is a simple planning frame, in percentages only. Say your home appraises at the value you hoped. Your payoff plus financed costs may already use most of the 80%. What is left is your cash. If the appraisal comes in light, the cash shrinks faster than the value does, because the cap is a fixed share of a smaller number.
Costs financed into the loan sit inside the cap too. Paying them from savings leaves more room for cash, though it uses your own money. Weigh both.
Good Uses of the Cash, Risky Uses of the Cash
Uses that tend to support the goal of a steadier budget:
- Paying off higher-cost, variable debt.
- Funding repairs that protect the home’s value.
- Building a reserve so a job gap does not become a payment problem.
Uses that deserve a second look:
- Spending that does not hold value.
- Taking the full available amount with no plan for it.
- Debt you may run back up after paying it off.
Cash-out raises leverage. HUD cut the cap for exactly that reason, to limit losses when borrowers default.
Timing Against Your ARM and the 12-Month Clock
The CFPB’s ARM handbook warns borrowers not to count on refinancing before a reset. You may not qualify if your home’s value falls, or if a job loss or medical costs hurt your finances. The Federal Reserve’s consumer guide also flags a prepayment penalty on the current loan as a hurdle, so read your note before you apply.
Practical timing: confirm you have passed 12 months of ownership and occupancy before the case number is assigned. Check your last 12 months of mortgage payments. Then work backward from your adjustment date, leaving room for a second appraisal attempt if needed.
Where the General Rule Breaks
- Appraisal shortfall. A low value can cut the cash to nearly nothing. Options: review the report for errors, take less cash, restructure, or wait.
- Not owner-occupied. The program is for your principal residence. A rental or second home does not fit it, and occupancy decides the leverage.
- Under 12 months. If you have not owned and lived in the home for 12 months, the standard cash-out test fails. A different refinance may fit.
- Hawaiian Home Lands. The 80% change does not apply to Section 247 mortgages.
- County loan limits. County loan limits apply and change every year. For most borrowers the 80% test binds first.
- No lower payment. A new fixed payment can come out higher than your current ARM payment. Compare before you commit.
Break-Even and When Not To Do This
Compare what the refinance costs against what it saves in avoided reset risk and any payment change. Costs include lender, title, and third-party charges plus prepaids. They differ by file, so get a Loan Estimate and read it line by line.
Skip cash-out when:
- You do not need the cash and a Streamline or rate-and-term would do.
- The new payment, with mortgage insurance on a larger balance, strains your budget.
- You plan to move soon, before the costs pay back.
- Your appraisal or payment history puts the file at risk.
Pre-Application Checklist
- Proof you have owned and occupied the home 12 months.
- Twelve months of mortgage payment records.
- Your current loan statement and payoff estimate.
- Recent pay stubs, tax documents, and bank statements.
- A rough equity estimate at 80% of a realistic value.
- A target cash amount and a written purpose for it.
- Your ARM adjustment date and any prepayment terms on the note.
Key Terms Defined
Cash-out refinance: A new, larger mortgage that pays off the old one and gives you the difference in cash.
Adjusted value: The value HUD’s rules apply the 80% cap against, starting from the appraisal.
Fixed-rate mortgage: A loan whose interest rate, and so principal and interest, stays the same for the term.
Adjustable-rate mortgage (ARM): A loan whose rate can reset after an initial period.
Mortgage insurance premium (MIP): FHA’s insurance, with an upfront part and an annual part.
Rescission: Your right to cancel certain refinances within three business days after closing.
Frequently Asked Questions
Can I take an FHA cash-out refinance if my current loan is not FHA?
Yes, in general. The new loan is an FHA loan, and it pays off whatever mortgage you have now. The tests that matter are 12 months of ownership and occupancy, payment history, and the 80% cap, all subject to lender guidelines.
How much cash can I actually take?
Eighty percent of the home’s value, minus your payoff, any liens cleared, and financed costs. The appraisal sets the starting point, so a low value shrinks the cash faster than it shrinks the home’s worth.
Can I go fixed without taking any cash?
Yes. If your current loan is FHA, the Streamline needs no appraisal. A rate-and-term refinance also gets you fixed with no cash and reaches higher leverage than cash-out.
Does the three-day cancel window let me keep my old loan?
No. Rescinding the new loan does not cancel your obligation to keep paying the original one. The window generally applies to a principal residence, not a rental or second home.
Will the mortgage insurance premium change my payment?
Yes. The upfront premium is usually financed into the balance, and the annual premium is charged on the outstanding balance. Both depend on the loan’s terms and are shown on your Loan Estimate.
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.
Get Started
Ready to find the right loan for you?
See your offer in seconds. No credit pull, no obligation.
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 2019-11
2. HUD press release on the cash-out LTV change
3. CFPB: right of rescission on non-purchase mortgages
4. HUD press release on the annual premium reduction
5. CFPB Consumer Handbook on Adjustable-Rate Mortgages
6. Federal Reserve: Consumer’s Guide to Mortgage Refinancings
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: Can You Get Approved for an FHA Cash-Out Refinance Without an Escrow Account? · FHA Cash-Out Refinance Requirements With No Mortgage · Can You Get Approved for an FHA Cash-Out Refinance Twice in a Row?
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.