The Quick Read: An FHA cash-out refinance replaces your current mortgage with a larger FHA-insured loan and pays you the difference. To qualify, you generally need to have owned and lived in the home as your primary residence for 12 months before the case number is assigned, and the new loan must stay within 80% of the home’s adjusted value. The file then moves through application, appraisal, underwriting, a Closing Disclosure, signing, and a three-business-day right to cancel before cash is released. Everything here is subject to lender guidelines and full file review, and none of it is a commitment to lend.
- Occupancy: the home must be your principal residence.
- Seasoning: 12 months of ownership and occupancy before the case number.
- Leverage: the new loan tops out at 80% LTV.
- Mortgage insurance: an upfront premium plus an annual premium.
- Last step: a three-business-day cancellation period before funds go out.
What Is an FHA Cash-Out Refinance?
It is a new FHA-insured mortgage that pays off your old one and puts the leftover equity in your hands as cash. You do not need to say what the money is for. You do not need to be coming from an FHA loan either; the new loan is FHA, the old one can be something else.
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.
Here is the part borrowers miss. The new balance has to cover the payoff, the closing costs, any financed upfront premium, and the cash you take. All of that sits under a leverage cap. So the cash you can take is whatever is left after the cap is applied, not whatever you wish to take.
Lendmire is a mortgage broker. It places these loans through wholesale lenders, and the lender makes the credit decision.
How Much Can You Borrow? The 80% Rule
The cap is 80% of adjusted value. That is the combined loan-to-value ceiling, and it includes any other liens on the home. HUD cut the limit to 80% for cases assigned on or after September 1, 2019, in Mortgagee Letter 2019-11. The stated purpose was to build more equity into cash-out loans and reduce losses when one defaults.
The old cap was 85%. HUD’s announcement of the change said the move lined FHA up with the cash-out limit the government-sponsored enterprises allow. The letter itself has since been folded into HUD’s Handbook 4000.1, so the handbook is the live rule.
Two details drive real files:
- The check is on the whole loan. Payoff, costs, and your cash all have to fit under 80%.
You keep at least 20% equity after closing. That is the point of the rule.
Who Qualifies? The Eligibility Screen
1. Ownership and occupancy. At least one borrower must have owned and lived in the home as a principal residence for the 12 months before the FHA case number is assigned. The clock runs back from the case number, not from closing.
2. Primary residence. Standard FHA cash-out is for the home you live in. Occupancy decides the leverage: a second home or rental does not get this program.
3. Equity. The new loan has to fit within 80% of adjusted value after payoff and costs.
4. Payment history. A clean record on the current mortgage matters. Lenders look hard at late payments in the recent past, and some set their own stricter overlay.
5. Credit and ratios. Across the wholesale programs Lendmire places FHA files with, the floor starts at a 580 decision score. HUD’s lower 500-579 tier exists but the network does not reach below 580. The base debt ratios are 31/43 (housing and total) with no compensating factors. Documented compensating factors can stretch them to as high as 40/50 for the strongest files, and the automated finding governs most files.
Credit events carry HUD waiting periods: two years from a Chapter 7 discharge and three years from a foreclosure. Those are HUD’s rules, not a promise of approval at the end of the window.
One more point on income. A non-occupant co-borrower is allowed on an FHA purchase, but that flexibility does not carry over to cash-out. Ask your loan officer how income is counted before you build the file around it.
The Application-to-Funding Walkthrough
This is what happens, in order, and what you do at each stage.
1. Application and Loan Estimate. You apply and the lender issues a Loan Estimate. Treat it as the shopping document. Compare it across lenders before you commit.
2. Case number. The lender orders the FHA case number. It starts the occupancy and value clock, so the 12-month check lands here.
3. Appraisal. An appraiser sets the adjusted value. Your equity and your maximum cash both come from this number.
4. Underwriting. The lender verifies income, assets, credit, and the payment history on your current loan. Expect a conditions list. Answer it in full, not piece by piece.
5. Clear to close. Once conditions are satisfied, the file is cleared and final figures are set.
6. Closing Disclosure. The lender must deliver it at least three business days before you close, per the CFPB’s explanation of the Closing Disclosure. Compare it line by line with your last Loan Estimate.
7. Signing. You sign the loan documents.
8. Right to cancel. On a refinance of your primary residence, you have until midnight of the third business day after the transaction to rescind, according to the CFPB. Saturdays count as business days. Sundays and legal public holidays do not.
9. Funding. The cash is released after the rescission period ends. Not before.
Build a buffer around steps six through nine. The two three-day windows run back to back, and a change to the Closing Disclosure can reset the first one. The CFPB has also asked for public input on whether the pre-closing wait plus the rescission period delay refinances too much, but the request for information is not a rule change. Check the rules in effect when you apply.
How the Math Works in Practice
Skip the dollar amounts and think in percentages. Say your appraised value sets 100%. The new loan can reach 80% of that. Out of that 80%, three things get paid first: your old mortgage payoff, your closing costs, and the financed upfront premium. Whatever is left is your cash.
Now picture two homeowners with the same home value. One owes about half the value on the current mortgage. The other owes about three-quarters. The first has a wide gap between payoff and the cap, so meaningful cash is possible. The second has only a thin sliver. Costs and the financed premium can eat most of it, which leaves little cash or none.
That is why the first move is a payoff check, not an application. If the payoff sits well under 80% of value and the occupancy paperwork is clean, you have a workable starting point. The closer the payoff creeps toward that cap, the less room remains for cash.
A related point on the premium. The upfront premium is 1.75% of the base loan, and it can be financed. Financing it adds to the balance. The annual premium is billed monthly on top of principal and interest, and its level depends 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. Because a cash-out loan caps at 80%, the shorter duration generally applies, subject to the current schedule and mortgagee letters.
Mortgage Insurance and the Monthly Budget
Cash-out loans carry both premiums. The upfront premium is 1.75% of the base loan, per HUD Mortgagee Letter 2023-05, and the annual premium runs between 0.15% and 0.75% of the balance depending on term, amount, and LTV. These are program facts, not an advertised price.
What changes your monthly budget:
- A bigger balance means a bigger principal and interest payment.
- A financed upfront premium adds to that balance.
- The annual premium shows up monthly.
- The new loan restarts your amortization clock, so you may be paying interest on a longer horizon.
Refinancing from one FHA loan into another within three years can bring a refund credit against the new upfront premium. It is a credit, not cash back.
Where the General Rule Breaks
Some situations need their own answer.
- Owned less than 12 months. Standard cash-out is not available. Appreciation does not shorten the wait. A rate-and-term refinance is a different lane: it reaches 97.75% LTV on a principal residence occupied for the previous twelve months, but it does not pay you cash.
- Inherited and rented out. Living elsewhere while the property is a rental does not build the occupancy history that cash-out requires, so the seasoning clock starts only once you move in.
- Rentals and second homes. Occupancy decides the leverage. FHA cash-out is a primary-residence program.
- FHA Streamline. It refinances an existing FHA loan with no appraisal, a limited credit review, and a net tangible benefit. It is built for reducing cost, not for taking equity out.
- Buying out a co-owner. If you take any extra cash beyond the payoff and costs, expect the lender to treat the loan as cash-out.
- Hawaiian Home Lands (Section 247). The 2019 LTV change did not apply to those mortgages. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
County loan limits apply to every FHA loan and change annually. Ask for the current limit for your county at application.
What Slows or Derails a File
These are the usual culprits, with the fix.
- A low appraisal. The cap works off the lower value, so cash shrinks fast. Ask the lender how an appraisal reconsideration works and send recent nearby sales and documented upgrades. If the value holds, take less cash or wait.
- A late payment on the current mortgage. Pull your own payment history before applying. If a lender overlay is stricter than HUD’s, ask about it up front.
- Occupancy gaps. If the paperwork does not show 12 months of living there, the file stalls. Utility bills, license address, and tax records help.
- Debt ratios over the line. Pay down revolving balances before the file goes in, not during underwriting.
- A changed Closing Disclosure. A material change can restart the three-day wait. Avoid last-minute changes to costs or cash amounts.
- Slow responses to conditions. Every open item holds up clear to close. Send documents complete and legible the first time.
Document Checklist
Have these ready before the application:
- Photo ID and Social Security number
- Recent pay stubs and prior-year income documents
- Bank and asset statements
- Your latest mortgage statement and homeowners insurance declarations
- Proof of occupancy for the last 12 months
- Documentation for any outstanding debts you plan to pay off at closing
A lender may ask for more, depending on how you earn income.
FHA Cash-Out Compared With Other Options
| Factor | FHA Cash-Out | Conventional Cash-Out | Keep Current Loan |
|---|---|---|---|
| Leverage ceiling | 80% of adjusted value | Varies by lender guidelines | No change |
| Mortgage insurance | Upfront plus annual | Depends on LTV and product | Already in place |
| Credit floor | Starts at 580 in the network | Often higher | Not applicable |
| Cash to you | Yes, within the cap | Yes, within the cap | None |
A conventional cash-out may suit borrowers with stronger credit and a bigger equity cushion. FHA tends to fit homeowners whose credit would make conventional pricing hard. VA cash-out is a separate program for eligible veterans and runs under its own rules. Lendmire’s piece on jumbo cash-out refinance requirements covers the higher-balance path.
The tradeoff is simple. You pay mortgage insurance and reset your loan term in exchange for cash and, possibly, easier qualifying.
Key Terms Defined
Adjusted value: The appraised value used to measure the loan-to-value limit.
Case number: The FHA identifier a lender orders to start the occupancy and value clock.
Upfront mortgage insurance premium (UFMIP): A one-time charge of 1.75% of the base loan, which can be financed.
Annual mortgage insurance premium (MIP): A yearly charge billed monthly, based on term, loan amount, and LTV.
Right of rescission: Your three-business-day window to cancel a refinance of your primary residence.
Seasoning: The required period of ownership and occupancy before you can cash out.
Pros and Cons
Pros: access to home equity without selling, a lower credit floor than many conventional options, and no restriction on how you spend the money.
Cons: mortgage insurance for the life of the premium schedule, a larger balance, a restarted loan clock, and the 80% cap that limits how much cash you can pull.
Frequently Asked Questions
Do I need an existing FHA loan to get an FHA cash-out refinance?
No. The new loan is FHA-insured, but your current mortgage can be any type. What matters is that you have owned and lived in the home as your primary residence for the 12 months before the case number.
How much cash can I actually take out?
It is whatever remains after the new loan, capped at 80% of adjusted value, pays off your old mortgage, closing costs, and any financed upfront premium. A low appraisal shrinks that amount fast.
Does the 12 months count to closing or to the case number?
To the case number. The clock runs back from the date the FHA case number is assigned, so start the occupancy paperwork early.
When do I get the money?
After you sign, you have until midnight of the third business day to rescind. Funds are released once that window ends. The Closing Disclosure must also reach you at least three business days before signing.
Can I use FHA cash-out on a rental or second home?
No. Occupancy decides the leverage, and this program is for your principal residence.
What if my credit score is below 580?
The wholesale programs Lendmire works with start at 580. HUD allows a lower tier, but the network does not reach below 580, so a lower score generally needs a different path or time to rebuild credit.
Next Steps
Start with three numbers: your estimated value, your payoff, and your 12-month occupancy record. If the payoff sits well under 80% of value and the occupancy paperwork is clean, you have a workable file. 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. Call 828-256-2183 or request a quote through Lendmire’s quote page.
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.
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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 2019-11
2. HUD press release on the cash-out LTV change
3. CFPB’s explanation of the Closing Disclosure
5. HUD Mortgagee Letter 2023-05
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: FHA Cash-Out Refinance Requirements With a 700 Credit Score · How FHA Cash-Out Refinance Seasoning Requirements Work · FHA Cash-Out Refinance Requirements Before Your ARM Resets
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.