The Quick Read: the lender takes your new base loan, multiplies it by 1.75%, and stacks that premium on top of the loan. The 80% cap applies to the base loan, so the added premium does not shrink the cash you can take. If your current loan is FHA and young enough, a credit from the old loan can cut the new premium. You then choose to finance the premium or pay it in cash, and the choice is all or nothing.
Key Takeaways
- The upfront premium is 1.75% of the base loan, the same on a cash-out as on any other FHA loan.
- It is charged on the whole new base loan, not just the cash you pull out.
- A financed premium raises your balance and your monthly payment. Paying it in cash raises what you bring to closing.
- A credit from an existing FHA loan can offset part of the new premium. It is never paid to you as cash.
What Is Upfront MIP, and How Is It Different From the Monthly Kind?
Upfront MIP is a one-time mortgage insurance premium on an FHA loan. It is 1.75% of the base loan, and most borrowers roll it into the balance. The monthly kind, called annual MIP, is a separate charge that rides in your payment.
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 split in plain terms. FHA loans carry two layers of insurance. The upfront layer is paid once, at closing. The annual layer is paid monthly, and it ranges from 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. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
A cash-out refinance on an FHA loan pays off your old mortgage with a new one and hands you the leftover equity.
Does an FHA Cash-Out Trigger a New Upfront Premium?
Yes. A new FHA loan means a new upfront premium, even when the loan you are paying off was also FHA. The old premium is not “carried over.” Your old loan ends, and the new one is insured from scratch.
Many borrowers assume cash-out carries a higher premium than other FHA refinances. It does not. HUD Mortgagee Letter 2023-05 sets the upfront premium at 1.75% of the base loan for all FHA mortgages. Purchase, rate-and-term, cash-out, and streamline all use the same percentage.
That letter cut the annual premium for many borrowers. It left the upfront premium alone. If someone tells you the premium cut lowered your upfront cost, they are mixing up the two layers.
How the Loan Gets Built, Step by Step
The order matters, because the premium comes last. Across the FHA cash-out files Lendmire arranges, the build runs like this.
1. The home must qualify. Across the programs Lendmire places FHA files with, cash-out is for an owner-occupied principal residence you have owned and lived in for 12 months before the case number is assigned. The lender also reviews your payment history on the existing loan.
2. The appraisal sets the value. The appraised value is the number the 80% cap is measured against.
3. The lender sizes the base loan. The base loan is your payoff balance, plus allowed closing costs, plus the cash you want. Together they cannot pass 80% of the appraised value.
4. A credit is applied, if you have one. If your existing loan is FHA and recent enough, the lender subtracts a refund credit from the new premium. More on that below.
5. The premium is calculated. Base loan times 1.75%, less any credit.
6. The premium is added on top. If you finance it, the new total loan equals the base loan plus the premium. That total is the insured amount.
HUD’s handbook glossary draws the line this way. The base loan is the mortgage amount before any financed premium. The total loan includes it. The 80% test uses the base loan. The premium sits above that test, not inside it.
One practical point: because the premium is a percentage of the whole base loan, it does not care how much of that loan is cash to you. A cash-out that mostly pays off the old balance carries nearly the same premium as one that pulls a lot of equity. The premium follows the loan size.
A Worked Example, in Percentages
Say a home appraises at 100% of its value. The numbers below are modeled, not a quote, and they use percentages of value so you can see the shape.
| Step | Share of appraised value |
|---|---|
| Maximum base loan (cash-out cap) | 80.0% |
| Upfront premium at 1.75% of base | 1.4% |
| Total loan, premium financed, no credit | 81.4% |
| Total loan with a refund credit | Between 80.0% and 81.4% |
Look at the third row, the total loan with the premium financed and no credit. Total debt lands above 80% of value, and that is normal. The cap controls the base loan. The financed premium rides above it.
Now the tradeoff. If you hold the base loan at the 80% cap, the premium adds roughly 1.4 points of value to your debt. Your cash to closing does not change if you finance it. Your payment goes up, and annual MIP is also charged on the larger balance.
If your goal is a specific amount of cash in hand, back-solve it. The cap limits the base loan, and the premium is figured on that base. Your lender can run it both ways so you see the net cash after the payoff, closing costs, and the premium.
Finance It or Pay Cash?
You can finance the premium or pay it in cash at closing. You cannot split it. Your lender handles that math.
| Factor | Finance the premium | Pay it in cash |
|---|---|---|
| Cash needed at closing | Lower | Higher |
| Loan balance | Larger | Unchanged |
| Interest on the premium | Yes, over the loan’s life | None |
| Monthly payment | Higher | Not raised by it |
| Effect on cash-out proceeds | Premium comes from the loan | Premium comes from your pocket |
The CFPB explains that FHA mortgage insurance has an upfront cost and a monthly cost, and that borrowers may roll the upfront fee into the mortgage. Rolling it in raises the loan amount and the overall cost. That is the honest tradeoff: less cash now, more debt later.
A financed premium also accrues interest as long as you carry the loan. Someone who plans to keep the loan only a few years pays less of that interest than someone who keeps it for thirty. If you need every dollar of the equity you are pulling, financing the premium keeps your cash at closing lower. If you have spare cash and a long horizon, paying it may suit you better.
The Refund Credit From Your Old FHA Loan
If you refinance an FHA loan into another FHA loan within three years, HUD gives you a credit toward the new upfront premium. The credit shrinks each month over that window. Newer loans get a bigger credit. Older ones get less, then nothing.
Three points to get right.
It is a credit, not a check. It reduces the new premium. It is not paid to you in cash. HUD’s FHA Connection guide describes the unearned premium from the prior case being applied to the new case.
It requires an FHA loan going to an FHA loan. If your current mortgage is conventional or VA, there is no credit. The prior loan was not FHA-insured, so the new premium is full price.
Cash-out is covered, but confirm the details. HUD’s refund rule turns on FHA-to-FHA within three years. Some commercial pages say the credit does not apply to cash-out, yet the handbook language is broader. Ask your lender how the credit applies to your specific cash-out before you count on it.
Timing also plays a part. Cash-out needs 12 months of ownership and occupancy first. By then, part of the credit has already declined. Waiting past the three-year window loses it entirely.
Where the General Rule Bends
A few situations change the picture.
- Indian Lands (Section 248) loans do not require an upfront premium. Section 247 loans have no annual premium. Both are narrow programs.
- Free-and-clear homes. A home with no mortgage can still go through an FHA cash-out. There is no old premium to credit, so the new one is full price.
- Streamline and simple refinances. These are different products. A simple refinance, in HUD’s wording, is a no-cash-out refinance of an existing FHA loan.
- Non-FHA to FHA. A conventional loan moving into FHA cash-out gets no refund credit.
Cash-Out vs. Streamline vs. Rate-and-Term
All three carry the same 1.75% upfront premium. What differs is what the loan allows and what it takes to get one.
| Factor | FHA cash-out | FHA streamline | FHA rate-and-term |
|---|---|---|---|
| Cash to you | Yes | No | No |
| Appraisal | Yes | No | Yes |
| Maximum leverage | 80% LTV | Existing FHA loan only | Up to 97.75% |
| Existing loan must be FHA | No | Yes | No |
| Credit review | Full | Limited | Full |
The streamline requires a net tangible benefit, and the premium continues. If you do not need cash, a streamline or rate-and-term may cost you less in loan size. If you do need cash, the 80% cap and the premium math above are what you are working with.
What It Does to Your Decision
The premium shapes four things you can feel.
Net proceeds. Financing the premium does not reduce the base loan or the cash you can take, but it adds debt for the same cash. Paying it in cash instead means it comes out of your pocket.
Monthly budget. A bigger balance means a bigger payment. Annual MIP applies to the larger balance too.
Qualifying. The bigger payment feeds your debt-to-income ratios. The base pair on FHA is 31/43 (housing and total), and documented compensating factors can stretch to 40/50 at the top tier. All of this is subject to lender guidelines and full file review.
Timing. If your current loan is a young FHA loan, the credit may be meaningful. If it is older, plan on the full premium.
You will see the premium on your Loan Estimate and again on your Closing Disclosure. Compare the two. If the line moves, ask why. Often it is a changed base loan or a credit that was updated.
Common Misconceptions
- “The premium is refundable.” Only as a credit on an FHA-to-FHA refinance within three years.
- “I can finance half.” No. It is all financed or all cash.
- “A financed premium eats into my 80%.” The cap applies to the base loan. The premium sits above it.
- “The credit comes to me as cash.” It only offsets the new premium.
- “Cash-out costs more upfront.” The 1.75% is the same on every FHA loan.
- “The cash-out cap is 85%.” That was an older HUD figure. The current cash-out limit is 80%, per HUD’s handbook transmittal.
Key Terms Defined
Base loan amount: the mortgage amount before any financed upfront premium is added.
Total loan amount: the base loan plus the financed premium. This is the insured amount.
Upfront MIP (UFMIP): the one-time FHA mortgage insurance premium, set at 1.75% of the base loan.
Annual MIP: the monthly FHA mortgage insurance charge, paid through your payment and based on the balance.
Refund credit: a reduction in the new upfront premium when you refinance one FHA loan into another within three years.
Cash-out refinance: a new mortgage that pays off the old one and gives you some of your equity in cash.
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. Reach the team at 828-256-2183 or request a quote through the site. Every figure here is subject to lender guidelines and full file review, and none of it is a commitment to lend.
Frequently Asked Questions
Can I pay the upfront MIP in cash instead of financing it?
Yes, but it is one or the other. You either finance the whole premium or pay the whole premium in cash at closing. Paying cash keeps your loan balance and monthly payment lower. It also raises the money you bring to the table.
Does the financed premium reduce how much cash I can take out?
No. The 80% cap is measured on the base loan, and the premium is added above it. Your cash out depends on your value, your payoff, and your costs. The premium raises your total debt for that same cash.
How much of a refund credit will I get from my old FHA loan?
It depends on how old the loan is. The credit declines month by month across a three-year window and ends after that. Your lender can look up the exact amount for your loan. Treat any figure on a general website as a rough guide only.
Is a cash-out the same as a streamline for the premium?
The percentage is the same, 1.75% of the base loan. The loans differ in other ways. A streamline refinances an existing FHA loan with no appraisal and no cash back. A cash-out needs an appraisal and an 80% cap on the base loan.
Will I pay upfront MIP again if I already have an FHA loan?
Yes. A new FHA loan carries its own upfront premium. The credit from the old loan can offset part of it if the old loan is recent enough. Without that credit, the new premium is full price.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. 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. HUD Handbook 4000.1 Glossary
3. CFPB: What is mortgage insurance
4. HUD FHA Connection upfront premium guide
5. HUD Handbook 4000.1 transmittal
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 an FHA Cash-Out on a Home With a Solar Lien? · Best FHA Cash-Out Refinance Program Within FHA Loan Limits · FHA Cash-Out Refinance Options That Roll Closing Costs Into the Loan Amount
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.