The Quick Read: It depends. Your total monthly outflow drops only if the new mortgage payment, including FHA mortgage insurance, comes in below your old mortgage payment plus the minimums on the debts you retire. The new loan is bigger, it carries mortgage insurance, and it usually runs over a long term. A lower payment is also not the same as a lower cost. Everything here is subject to lender guidelines and full file review. This is not a commitment to lend.
How Does the Payment Math Actually Work?
Your payment falls only when one number beats another. On one side is the new principal, interest, mortgage insurance, taxes and homeowners insurance. On the other is your current mortgage payment plus every minimum payment you are about to eliminate.
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.
Think of it as two columns. The “before” column holds the old mortgage, each card, the car loan, and any personal loan. The “after” column holds one larger mortgage payment. Nothing else.
Three things push the “after” column up:
- A bigger balance. Debts, closing costs, and the financed upfront premium all go onto the new loan.
- Mortgage insurance. FHA charges it on a cash-out refinance, and it is part of the monthly payment.
- A longer runway. A card or car loan that would be gone in a few years now sits inside a thirty-year loan.
The thing that pulls the “before” column down is high minimums. Several credit cards with large minimum payments, or a short-term loan with a hefty monthly bill, are the debts most likely to make this work. Small balances with tiny payments rarely do.
Here is the catch most people miss. Your mortgage line almost always goes up. The savings show up only in the debts that vanish. You are trading several payments for one, and whether the trade pays depends on what you retire.
What Does an FHA Cash-Out Allow?
An FHA cash-out refinance replaces your current mortgage with a new, larger one, and you receive the difference as cash. It works as a refinance whose proceeds are not limited to specific purposes, so paying off consumer debt fits.
These are the main rules that apply:
- The cash-out reaches 80% loan-to-value (LTV, meaning the loan as a percentage of your home’s appraised value) on a home you have owned and lived in for 12 months before the case number.
- The 80% cap covers the whole new loan, not just the cash portion. A second mortgage or HELOC you keep counts toward it.
- It is for your primary residence only. No second homes, no rentals.
- Lenders review your mortgage payment history, and HUD requires the lender to document the previous 12 months.
There is no consolidation break. HUD does not loosen any cash-out rule because the money retires debt. HUD Mortgagee Letter 2019-11 cut the maximum LTV on cash-out refinances to 80% of adjusted value, down from 85%. Anyone still quoting 85% is working from old information.
How Does Mortgage Insurance Change the Payment?
Mortgage insurance can turn a “this should work” into a “this barely works.” FHA charges two kinds, and both hit a cash-out.
The upfront premium is 1.75% of the base loan amount. Most borrowers finance it, so it adds to the balance instead of coming out of pocket. The annual premium is paid monthly. It runs between 0.15% and 0.75% of the balance, depending on term, loan amount, and LTV.
How long the annual premium lasts matters too. On a thirty-year loan above 90% LTV, it lasts for the full term. At or below 90% LTV, it ends after eleven years. Because a cash-out tops out well below 90% LTV, the eleven-year rule is the one that applies on a thirty-year loan, though the details depend on the loan. Every figure here varies by lender and program.
These are program facts, not prices. What matters for your payment is the logic. Every dollar of debt you roll in also gets charged the upfront premium and then carries the annual premium. A debt with a small monthly payment relative to its balance is expensive to roll in.
That leads to a simple ranking method.
Which Debts Are Worth Rolling In?
Rank each debt by monthly payment relieved per dollar of balance added to the loan. The highest ratio wins. The lowest ratio is usually better left alone.
| Debt type | Payment relief per dollar added | Usually worth rolling in? |
|---|---|---|
| Credit cards | High (large minimums) | Often yes |
| Personal loans | High (short terms) | Often yes |
| Auto loan, years left | Medium | Depends on balance |
| Auto loan, nearly paid off | Low | Usually no |
| Low-payment student loans | Low | Usually no |
A few practical notes on that table:
- Cards usually lead. Minimum payments are high compared with the balance, and the balances are the easiest to retire in full.
- Short-term loans can be big winners. A personal loan with a three-year term has a steep monthly payment. Stretching it over thirty years is what drops the payment, and it is also what raises the total interest cost.
- Nearly paid-off loans make poor candidates. You would pay mortgage insurance and years of extra interest on a balance that was about to disappear.
- Student loans need a second look. Federal student loans often carry repayment protections that disappear once the debt moves into a mortgage. Weigh that before including them.
Picture a homeowner with four credit cards and a personal loan. Together those five minimums take a big bite of the monthly budget, while the balances equal a modest slice of home value. That is a strong candidate. Now picture a homeowner whose only other debt is a car loan with 10 months left. Rolling that in adds cost for almost no relief.
Will It Lower My Payment? Two Honest Scenarios
Here are two scenarios in plain words, with no dollar figures.
Scenario one: it works. A homeowner has several credit cards, all near their limits, and a personal loan. Their combined minimums are large. The existing mortgage payment is moderate. After the refinance, the new mortgage payment rises, but by less than the combined minimums disappear. The total monthly outflow drops. The trade-off is that debts once on track for a few years of payments now sit inside a thirty-year loan.
Scenario two: it does not. A homeowner has a very low payment on the current mortgage, and the debts to retire are modest. The new, larger loan, with its upfront and annual mortgage insurance, produces a higher payment than the old mortgage plus the few small minimums combined. The total goes up, not down.
When does the payment go up instead? Watch for these triggers:
- Your existing mortgage payment is low and gets replaced by a much larger loan.
- You take far more cash than the debts you retire.
- The debts you retire have small minimums relative to their balances.
- You finance closing costs and the upfront premium, and the balance grows.
Run the comparison before you commit. If the “after” column does not beat the “before” column by a clear margin, a cash-out is not the right tool.
How Do Paid-Off Debts Affect Your Qualifying?
Debts paid off at closing generally drop out of your debt-to-income (DTI) ratio, which is your total monthly debt payments measured against your gross monthly income. The larger housing payment goes in. The net effect on your ratios is what the lender looks at.
For FHA, the base ratio pair is 31/43 (housing payment, then total debt) with no compensating factors. Documented compensating factors can stretch that to 40/50 at the top tier, and the automated finding governs most files.
On credit, the wholesale programs Lendmire places FHA loans with start at a decision score of 580. HUD itself has a lower tier for scores of 500-579, but that is a HUD rule the network does not reach below 580.
In practice, retiring several large minimums can improve your DTI even though the mortgage payment rises. That is why consolidation sometimes qualifies a borrower who would have been squeezed otherwise. The lender documents the payoffs through your credit report and payoff statements, and the debts must be paid at closing to drop out of the calculation.
How Does FHA Cash-Out Compare With Other Options?
Cash-out is one tool among several. Which fits depends on what you are trying to solve.
| Option | Touches your first mortgage? | Best fit |
|---|---|---|
| FHA cash-out | Yes, replaced | Weaker credit, large debt stack |
| Conventional cash-out | Yes, replaced | Stronger credit, more equity |
| HELOC or home equity loan | No, added behind it | Keeping a low-payment first mortgage |
| FHA Streamline | Yes, replaced | Lowering payment only, no cash |
The FHA Streamline refinances an existing FHA loan with no appraisal, a limited credit review, and a net tangible benefit. It cannot roll in consumer debt. If you only want a lower mortgage payment, it can be a better match. If you want to retire cards or loans, it is not an option.
If your current mortgage payment is low, a home equity loan or HELOC may leave that loan alone. The trade-off is that the second lien counts against the equity available if you later refinance.
What Are the Risks?
The risk is simple: unsecured debt becomes secured debt. Cards and personal loans have no claim on your house. Once you roll them into a mortgage, missing payments can put your home at risk.
The CFPB calls consolidating with home equity risky, noting you may pay closing costs and could end up underwater if home values fall. It also says that if you are spending more than you earn, consolidation probably will not fix the problem unless spending drops or income rises.
Behavior after payoff is the other half of the story. A CFPB research paper on cash-out refinances found that 92% of cash-out borrowers had credit card debt, and 57.2% of those with card balances saw a drop of at least 10% at refinance. Clearing the cards is not the same as keeping them clear.
Other costs to weigh:
- Equity loss. You keep at least 20% equity on a cash-out, but you have less than before.
- Longer payoff. Spreading debt over a long term lowers the payment and raises total interest.
- Closing costs. These are real, and they are usually built into the balance.
Key Terms Defined
Cash-out refinance: A new mortgage that replaces your current one and gives you the difference in cash.
LTV (loan-to-value): The loan balance as a percentage of your home’s appraised value.
DTI (debt-to-income): Your monthly debt payments measured against your gross monthly income.
Upfront mortgage insurance premium: A one-time FHA charge of 1.75% of the base loan, usually financed.
Annual mortgage insurance premium: An ongoing FHA charge, paid monthly, based on term, loan amount, and LTV.
Net tangible benefit: A measurable improvement the borrower gets from a Streamline, such as a lower payment.
What Should You Do Before You Apply?
Spend an hour on prep. It will save you from a refinance that does not pay.
1. List every debt. Write down each balance and each minimum payment.
2. Check your mortgage history. Lenders review the previous 12 months of payments.
3. Estimate your equity. The new loan, plus any second lien you keep, must fit under 80% of appraised value.
4. Rank your debts. Compare each debt’s balance against the cost of adding it to the new loan. Leave out the weak ones.
5. Decide what happens to the cards. Keep them open and unused, or close them. Decide now, not after.
County loan limits apply to every FHA loan, and they change each year, so your local limit is a ceiling to confirm early.
Frequently Asked Questions
Can I include auto and student loans?
Yes, if you want to. Any consumer debt can be paid from cash-out proceeds. Whether you should is a separate question. Auto loans close to payoff and federal student loans with repayment protections are often better left out.
Will it hurt my credit?
Applying means a credit check, which can cause a small, short-term dip. Paying off cards usually lowers your utilization, and CFPB research shows scores rising after the refinance and then easing back as balances creep up again. Your own habits decide the long-term outcome.
Do I need an existing FHA loan?
No. A cash-out can replace any mortgage, or a home owned free and clear. The Streamline is the product that requires an existing FHA loan, and it does not give cash.
What if I have a HELOC or second mortgage?
You can pay it off with the new loan, or keep it if the second lien agrees to stay behind. Either way, the combined balance must fit within the 80% cap.
Is a Streamline better if I only want a lower payment?
Often, yes, when you already have an FHA loan and do not need cash. It skips the appraisal and has a limited credit review. It cannot retire cards or loans.
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
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Lendmire arranges FHA, VA, conventional and jumbo purchase and refinance loans through wholesale lenders; every file is underwritten by the lender under the applicable program 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 Handbook 4000.1 update transmittal
2. HUD Handbook 4000.1 transmittal on payment history
3. HUD Mortgagee Letter 2019-11
4. CFPB: consolidating credit card debt
5. CFPB research paper on cash-out refinances and non-mortgage debt
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 vs Conventional Cash-Out on a Condo Not FHA-Approved · How Much an FHA Cash-Out Releases Before Occupancy Is Met · How to Switch From an FHA Streamline to an FHA Cash-Out
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.