Eighty Percent Is the Ceiling. Your File Decides the Rest.
An FHA cash-out refinance replaces your current mortgage — FHA or not — with a new FHA-insured loan, and HUD caps it at 80% of the property's adjusted value. Start with the reason: cash for a specific project, consolidating debt, or changing the loan you have. Then compare the proposed mortgage against the loan and debts you carry today.
Program facts published by HUD in Handbook 4000.1. Specific terms for your file come from the review, not from this page.
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Replace Any Existing Mortgage
The new FHA-insured loan pays off your current mortgage, whether it is conventional, FHA, USDA or VA. An existing FHA loan is not required, unlike an FHA Streamline.
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Capped at 80% of Adjusted Value
HUD limits an FHA cash-out refinance to 80% of the property's adjusted value (Handbook 4000.1, following Mortgagee Letter 2019-11). That is the program ceiling. What you are approved for still depends on the appraisal, county loan limits and your file.
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Access Equity, Subject to Review
Cash may be available when the approved loan exceeds the payoff and the costs charged against proceeds. Equity, approved loan and cash at closing are three separate numbers.
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Mortgage Insurance Applies
FHA-insured loans carry an upfront premium and an annual premium collected monthly, both set by HUD's published schedule. The upfront premium is commonly financed, which adds its own line to the arithmetic.
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Occupancy and Payment History Are Reviewed
HUD generally requires 12 months of ownership and occupancy as your principal residence before case-number assignment. An inherited home may qualify for an occupancy exception if it has not been treated as an investment property since inheritance. Payment-history requirements still apply; bring your actual dates for review.
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Your Primary Residence
FHA cash-out refinancing is for the home you live in. A rental or second home needs a different program — a property that covers its own payment from rent is usually reviewed as a DSCR loan.
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The Property State Still Matters
FHA loan limits are set by county, and investor availability varies. Give us the actual property location first so the review starts from the right limit.
Before the Conversation
What Shapes an FHA Cash-Out Review
Two things drive the review: what HUD requires of the property and your payment history, and the numbers behind the loan you have today. Bring both and the first conversation is useful immediately.
What HUD Requires
The Property and Occupancy
Your principal residence, generally owned and occupied for the 12 months before case-number assignment. HUD allows an inheritance exception to the minimum occupancy period if you have not treated the home as an investment property since inheriting it. If you rented it after inheritance, you must occupy it as your principal residence for at least 12 months before FHA cash-out.
A full appraisal — the 80% limit is measured against the adjusted value
The property type must be FHA-eligible, and county loan limits apply
Mortgage Payment History
HUD requires every payment on all your mortgages to have been made within the month it was due for the last 12 months, or since you took out the mortgage if that is shorter, and at least six payments on the current loan.
A payment made after the due date but within the same month still counts as on time; one that slipped into the next month does not, however the file is underwritten
Bring the actual dates — a summary is not enough to answer it
Handbook 4000.1 settles it.
The requirements above are HUD's, checked against the current handbook at review, not against this page. Read the FHA cash-out guide →
Your Current Loan and Goal
The Numbers
Property state and county, and whether you live in the home
Current loan type (conventional, FHA, USDA or VA) and approximate payoff
Your cash goal and what the cash is for
If Consolidating Debt
Each balance, payment and rate you plan to pay off
Payoff statements move the review faster than estimates
How long you expect to keep the home
What the Review Looks At
The appraisal, and the 80% ceiling measured against it
Credit, income, debts and the mortgage payment history HUD requires
Upfront and annual mortgage insurance, and whether the upfront premium is financed
FHA loan limits for the county and current lender requirements
The Arithmetic
Equity, Borrowing and Proceeds Are Three Different Numbers
Home value minus mortgage debt estimates equity. The amount a lender approves depends on the complete file and applicable limits. Cash at closing is what remains after the new loan pays existing liens and the costs charged against the proceeds. Most disappointment in a cash-out refinance comes from treating the first number as the third.
Estimated equity: value minus what you owe
Approved loan: appraisal, the 80% ceiling, county limits and your file
Cash at closing: approved loan minus payoffs and costs
A financed upfront mortgage insurance premium gets its own line
Consider a homeowner reviewing a proposed gross loan, a payoff and closing charges deducted from proceeds:
Assumed proposed loan: $240,000 Payoff of current mortgage: − $195,000 Closing charges and prepaids: − the amount on your Loan Estimate Before closing charges and other deductions: $45,000
The $240,000 is an assumed proposal used to show the arithmetic, not a rate quote, borrowing limit or approval. On a $300,000 adjusted value, HUD's 80% ceiling would be $240,000 — the ceiling, not a promise. Already have an FHA loan and only want a lower payment with no cash out? An FHA Streamline → is a different review. Compare the two →
If You Are Consolidating Debt
Compare Both Numbers, Not Just the Monthly One
Compare today's mortgage plus the debts being paid off with the new full housing payment and whatever debt remains. Include taxes, insurance and mortgage insurance consistently on both sides. Then compare term length, total interest, closing costs and how long you expect to keep the home.
A smaller monthly payment is not automatically a lower lifetime cost
Paying unsecured debt with a mortgage secures that debt against your home
Plan how paid-off balances will stay paid off
Debts you choose to pay off are usually paid directly from the proceeds at closing
Bring payoff statements; estimates slow the review
Read the debt-consolidation guide before you decide
Consolidating can lower what you pay each month. It can still cost more over time, because a balance you would have cleared in a few years is spread across a much longer term. That trade can be the right one; you should just see both numbers first.
The calculator below shows the monthly change on the numbers you enter. Your written comparison shows the lifetime cost.
Want to keep your current mortgage untouched? A HELOC → or second mortgage → leaves your first loan in place.
FHA Mortgage Insurance
Two Premiums, and Where Each One Lands
Every FHA-insured loan carries mortgage insurance. It does not cancel at an equity level; at these loan-to-value levels the annual premium runs 11 years, so it belongs in the comparison from the start — not as a footnote.
Premium
When It Is Charged
Where It Shows Up
Upfront premium (UFMIP)
Once, at closing
Commonly financed into the loan — its own line in the cash arithmetic
Annual premium (MIP)
Every month, for 11 years when the loan starts at 90% of value or less — every FHA cash-out does (HUD Handbook 4000.1, Appendix 1.0)
Part of your full monthly housing payment
Why It Changes the Comparison
A conventional cash-out at 80% or less usually has no monthly mortgage insurance; an FHA cash-out carries the annual premium for 11 years. Over the years you expect to keep the home, that difference can outweigh a lower starting payment — which is exactly what the written comparison is for.
✓ Both premiums are set by HUD's published schedule, confirmed at review
✓ A financed upfront premium is never deducted twice — keep it on one line
✓ Compare against a conventional cash-out before you decide — read the FHA cash-out guide →
No premium percentages are shown here on purpose. HUD publishes the current schedule and it changes; your actual premiums are quoted in writing at review rather than read off a marketing page.
Program Comparison
FHA vs. Conventional vs. VA Cash-Out
How the three programs differ in structure. Borrowing limits beyond HUD's published ceiling are not shown, because they depend on the appraisal, the county and the lender channel.
FHA Cash-Out
Conventional Cash-Out
VA Cash-Out
Who can use it
Anyone who qualifies
Anyone who qualifies
Eligible veterans, service members, certain spouses
Occupancy
Primary residence
Primary, second home or investment, by program
Primary residence
Published borrowing ceiling
80% of adjusted value (HUD 4000.1)
By program and occupancy
Program rules + lender review
Monthly mortgage insurance
Required
Depends on program and equity
None
Upfront fee
FHA upfront MIP
No upfront insurance premium; cash-out pricing adjustments can apply
Structure only. Specific terms for your file come from the written comparison.
Payment Comparison
Compare the Monthly Change on Your Numbers
Enter your home value, your payoff, the cash you want and the debts you would pay off. Every value is yours to change; the sample values only show the arithmetic. The result is a monthly comparison, not a lifetime-cost comparison and not an approval.
The approved loan amount, not your equity, sets what is possible. HUD caps an FHA cash-out at 80% of the appraised value.
From your Loan Estimate
HUD publishes the current schedule; enter the figure you were quoted
Arithmetic on the numbers you enter. Not a loan estimate, rate quote, borrowing limit or approval. A monthly saving can still cost more over the life of the loan; ask to see both. Subject to credit approval. This is not a commitment to lend.
The Process
What the Process Looks Like
The appraisal is often the longest step. Everything else moves around it, and payoff statements are the thing you can prepare in advance.
1
Share Your State, Loan and Goal
Property state and county, current loan type, approximate payoff and your cash goal. A soft credit inquiry at this stage does not affect your score. Tell us how long the home has been your principal residence, because HUD sets a 12-month requirement.
2
List the Debts and Gather Payoffs
Tell us exactly which debts you want paid off and bring payoff statements. Those payoffs must be exact at closing, so getting them early shortens the timeline more than anything else.
3
Appraisal, Underwriting and the Written Comparison
A full appraisal is required and sets the adjusted value that HUD's 80% ceiling is measured against. Underwriting reviews credit, income, debts, the property and the mortgage payment history HUD requires. Ask for a written comparison showing the complete payment including mortgage insurance, the lifetime cost and the cash you would actually receive.
4
Closing, Rescission and Payoff
For a refinance of your primary residence, when a right to cancel applies, day one of the three-business-day cancellation period is the first business day after you have signed the credit contract and received both the required disclosure and cancellation notices. Saturdays count; Sundays and legal public holidays do not. Confirm your cancellation deadline and expected funding date with your closing team. Debts you chose to pay off are usually paid directly, and any remaining cash comes to you.
Frequently Asked Questions
FHA Cash-Out Refinance FAQs
The questions borrowers actually ask about the 80% limit, mortgage insurance, consolidating debt and what the review involves.
An FHA cash-out refinance replaces your existing mortgage with a new FHA-insured loan and may provide funds after the payoffs and costs charged against the proceeds. The existing loan does not have to be FHA. It is a full refinance with a full appraisal and full underwriting, which is what separates it from an FHA Streamline.
HUD limits an FHA cash-out refinance to 80 percent of the property's adjusted value (HUD Handbook 4000.1, following Mortgagee Letter 2019-11). That is a program ceiling, not an approval: the loan you are approved for still depends on the appraisal, FHA loan limits for the county, your file and current lender requirements.
No. Home value minus mortgage debt estimates equity. The amount a lender approves depends on the complete file and the applicable program limits. Cash at closing is what remains after the new loan pays existing liens and the costs charged against the proceeds. Ask for a written comparison that shows all three.
HUD generally requires 12 months of ownership and occupancy as your principal residence before case-number assignment. For an inherited home, HUD does not require a minimum occupancy period if you have not treated it as an investment property since inheritance. The home must still be your principal residence. If you rented it after inheritance, you must occupy it as your principal residence for at least 12 months before FHA cash-out. Mortgage payment-history requirements and the rest of underwriting still apply. Bring your inheritance, move-in and any rental dates for review against current HUD and lender requirements.
An FHA Streamline refinances an existing FHA loan with reduced documentation and provides no cash out. A cash-out refinance works with any existing loan type, requires a full appraisal and full underwriting, and may provide funds. Ask for the one you actually want, because they are reviewed differently.
Yes. FHA-insured loans carry an upfront mortgage insurance premium and an annual premium collected monthly, both set by HUD's published schedule. The upfront premium is commonly financed into the loan, which adds its own line to the cash-at-closing arithmetic. Confirm the current premiums at review.
It can lower the monthly total while costing more over time, because a balance you might have cleared in a few years is spread across a longer mortgage term. Compare today's mortgage plus the debts being paid off with the new full housing payment and remaining debts, including taxes, insurance and mortgage insurance, and compare total interest and closing costs. Paying unsecured debt with a mortgage also secures that debt against your home.
No. FHA cash-out refinancing is for the home you occupy as your principal residence. A rental or second home needs a different program; a property that cash-flows on its own rent is usually reviewed under a DSCR loan instead.
Yes. A cash-out refinance requires a full appraisal, and the appraised value is what the 80 percent limit is measured against. That is why the appraisal, not the paperwork, often sets the timeline.
For an FHA cash-out, every mortgage payment in the last 12 months must have been made within the month it was due. A payment made after the due date but within that month still counts; one that slipped into the next month does not, however the file is underwritten. Bring your dates, and read the guide on payment history before you assume the answer.
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Ask for the Written Comparison
Share your state, current loan type, approximate payoff and cash goal. Ask for a written comparison that includes costs and the amount you would actually receive. No obligation, and no impact on your credit score at this stage.
