FHA cash-out refinance: requirements, limits and what it really costs
Reviewed by the Editorial Team · Updated October 22, 2026 · 9 min read
An FHA cash-out refinance replaces your mortgage with a larger FHA-insured loan and pays you the difference. It lets you borrow up to 80% of the home's value with more forgiving credit rules than a conventional loan, in exchange for mortgage insurance that runs for years.
Calculate your FHA cash in hand The most you can take at 80%, mortgage insurance, your new payment, and whether a second loan costs less.
Key takeaways
An FHA cash-out refinance can borrow up to 80% of the home's value; the 1.75% upfront premium is added on top of that limit.
You must have owned and lived in the home for 12 months and paid every mortgage payment on time over the past year.
Mortgage insurance costs 1.75% upfront plus 0.50% a year on most loans, for 11 years.
In 2025, lenders made 137,442 FHA cash-out refinances at a median 6.25% and approved 55.8% of applications they decided.
Max loan-to-value
80% of value, plus upfront MIP
Ownership
12 months owned and lived in
Mortgage insurance
1.75% upfront · 0.50% a year
Payment history
On time for the past 12 months
FHA 30-year average6.89%Optimal Blue OBMMI · Nov 5, 2026. Cash-out quotes can run higher.
Most cash on $350k owing $200k$80,00080% of value, before closing costs. See the table ↓
How an FHA cash-out refinance works
An FHA cash-out refinance pays off your current mortgage with a new, larger FHA-insured loan and hands you the difference. The mortgage you replace can be FHA, conventional or any other kind, and a home you own free and clear qualifies too.
Check you have owned and lived in the home for the past 12 months
Apply; the lender pulls credit and checks your mortgage payment record
Underwriting sizes the loan at no more than 80% of that value
At closing, the upfront premium is added and the old loan is paid off
The cash is released after the three-day cancellation window on your home
Only owner-occupied primary residences qualify. Income from a co-borrower who won't live in the home can't be used to qualify, and neither can rent from an accessory dwelling unit on the property.
How much cash you can take out
FHA caps the new loan at 80% of the home's value, counting any second mortgage you keep. The 1.75% upfront premium doesn't count toward that limit: it is added on top, so the loan you sign comes out slightly above 80% of the value.
Cash available on a $350,000 home, before closing costs
How much cash you can take out
Owed today
Largest base loan
Cash out
Loan with upfront MIP
$150,000
$280,000
$130,000
$284,900
$200,000
$280,000
$80,000
$284,900
$250,000
$280,000
$30,000
$284,900
$290,000
$280,000
None: owes too much
—
The largest loan depends only on the home's value; what you owe decides how much of it turns into cash. Closing costs then come out of that cash unless you pay them separately.
What an FHA cash-out refinance costs
Take a $350,000 home with $200,000 owed and a $60,000 need. The table prices the same $260,000 refinance as an FHA loan and as a conventional cash-out, using this week's averages from the same survey.
Worked exampleYou owe $200,000 on a $350,000 home and want $60,000: FHA vs. conventional cash-out
What an FHA cash-out refinance costs
Route
New loan
Monthly P&I30-yr fixed
Monthly MIPfirst year
Total
FHA cash-out at 6.89%, incl. $4,550 upfront MIP
$264,550
$1,741
$110
$1,851
Conventional cash-out at 7.09%, no mortgage insurance
$260,000
$1,746
$0
$1,746
Most cash with FHA$80,00080% of value; the upfront premium is added on top
Annual MIP over 11 years$13,5100.50% a year on the falling balance
FHA rate: Optimal Blue OBMMI 30-year FHA average 6.89% (Nov 5, 2026); conventional: OBMMI 30-year conforming 7.09%, same source and date. Premiums per HUD Handbook 4000.1: 1.75% upfront, financed, and 0.50% a year for 11 years. Closing costs excluded on both rows. Run your own FHA numbers
With the first year's premium, the FHA payment is $1,851, which is $105 a month more than the conventional cash-out. Annual MIP adds up to $13,510 over 11 years, on top of the $4,550 upfront premium.
FHA mortgage insurance on a cash-out
Upfront: 1.75% of the base loan, usually financed
Annual: 0.50% a year on most 30-year loans, paid monthly
Duration: 11 years at 90% loan-to-value or less, which covers every cash-out
No early removal: paying down the loan doesn't end it sooner
On top of the premium
Closing costs add origination, appraisal, title and recording fees. Across FHA cash-out loans in 2025, the median total was $12,080, and that figure includes the upfront premium.
What FHA cash-out borrowers actually got
Federal HMDA records list every FHA cash-out refinance lenders made. In 2025 that was 137,442 loans from 771 lenders, at a median rate of 6.25% on a 30-year fixed.
FHA cash-out refinances made in 2025137,442by 771 lenders
Approval rate55.8%vs. 73% for conventional cash-out
Median rate, 30-year fixed6.25%+0.41 pts vs. the market rate
Median closing costs$12,080on a median $245,000 loan
How much of the home's value they borrowed (loan-to-value, median 76%)
60% or less16.7%
60–70%17%
70–80%64.9%
80–90%1.4%
Lenders that made the most FHA cash-out refinances in 2025
Source: HMDA loan-level records for 2025 (FFIEC / CFPB), pulled Oct 22, 2026. Approval rate = loans made ÷ (loans made + denials). Rates and costs are medians for first-lien, owner-occupied, one-unit 30-year fixed loans; a lender's medians need at least 100 loans. Rates are from 2025, not today. HMDA has no credit scores, so these are not quotes. FHA closing costs include the 1.75% upfront mortgage insurance premium.
Most borrowers borrow close to the limit: 65% of these loans sat between 70% and 80% of the home's value, and the median was 76%. Approval is tougher than for conventional cash-out: 55.8% of decided applications, against 73.0%.
Rocket Mortgage made 21% of all FHA cash-out refinances, and the three largest lenders made 39%. Their median rates sit close together; closing costs spread much wider, so compare loan estimates line by line.
FHA rules: ownership, payment history and credit
HUD's handbook sets the ground rules. The home must have been owned and occupied as a primary residence by at least one borrower for the 12 months before the lender orders the FHA case number.
Ownership: 12 months owned and lived in, except inherited homes never rented
Payment history: every mortgage payment on time for the past 12 months
Current loan: at least six payments made on it
Forbearance: plan finished, then 12 on-time payments
Free and clear: a home with no mortgage can still cash out
A payment made late in the past year can disqualify the loan or force manual underwriting. On credit, HUD's minimum is 500 for loans at 90% of value or less, which covers every cash-out, but many lenders set a higher floor.
Debt-to-income limits run near 43%, and automated approval can stretch to about 57% with strong compensating factors. The new, larger payment counts in that ratio.
When an FHA cash-out refinance goes wrong
FHA's easier credit rules come with costs that are easy to underestimate. Four risks deserve a hard look before you sign.
Long insurance: annual MIP runs 11 years, even as your equity grows
Lost low rate: the new rate replaces your current one on the whole balance
Cheaper elsewhere: with good credit, a conventional cash-out may cost less
Appraisal shortfall: a low value shrinks the cash or sinks the loan
If you already have an FHA loan and only want a lower rate, an FHA streamline refinance skips the cash and much of the paperwork. The cash-out is for when you need money out of the home.
Before you sign
Price the FHA cash-out against a conventional cash-out and against keeping your loan and adding a home equity loan. The cash-out refinance calculator compares them, mortgage insurance included.
FHA cash-out vs. other ways to tap equity
An FHA cash-out is one of four common routes to equity or a better rate. They differ in how much you can borrow, whether mortgage insurance applies and which balance gets the new rate.
FHA cash-out, FHA streamline, conventional cash-out and home equity loan
FHA cash-out vs. other ways to tap equity
FHA cash-out
FHA streamline
Conventional cash-out
Home equity loan
Cash to you
Yes
No
Yes
Yes
Borrowing limit
80% of value
Not a cash loan
80% of value
Often 80–85% combined
Mortgage insurance
1.75% upfront + 0.50% a year
Continues
None at 80% or less
None
Credit rules
Most forgiving
Lightest paperwork
Strictest
Lender's own
New rate applies to
The whole new loan
The whole loan
The whole new loan
The second loan only
Existing loan must be
Any, or none
An FHA loan
Any, or none
Kept in place
The FHA cash-out earns its insurance cost when your credit score or debt-to-income ratio would price you out of a conventional loan. With strong credit and 20% equity left, the conventional cash-out usually wins.
Who an FHA cash-out refinance fits
An FHA cash-out refinance fits homeowners with solid equity whose credit score or debts make a conventional cash-out expensive or out of reach, and who have a clean recent payment record.
A credit score below what conventional lenders price well
A debt-to-income ratio above conventional limits
At least a year of ownership and on-time payments
A large one-time need, such as consolidating high-interest debt
FHA cash-out refinance: pros and cons
Pros
More forgiving credit and debt-to-income rules
Works on any mortgage, or a home owned free and clear
Fixed-rate options at FHA's typically lower average rates
Payment history counts more than a perfect score
Cons
1.75% upfront premium plus annual MIP for 11 years
Capped at 80% of value, the same as conventional
Replaces a possibly lower rate on the whole balance
Primary residences only, after 12 months of ownership
What lenders check
Expect a full credit review, income and asset documents, an FHA appraisal and twelve months of mortgage statements. Lenders verify you have lived in the home with employment records or utility bills.
Requirements at a glance
Owner-occupied primary residence, owned and lived in for the past 12 months
Every mortgage payment on time for the past 12 months
At least six payments made on the current loan, if there is one
A loan at or below 80% of the home's value, second liens included
Credit and debt-to-income ratio within HUD and lender limits
Income only from borrowers who will live in the home
What is the max LTV for an FHA cash-out refinance?
FHA allows a cash-out loan of up to 80% of the home's value, and the same cap applies to the combined total if you keep a second mortgage.
The 1.75% upfront premium is added on top of that limit, so the loan you sign comes out slightly higher.
How long do you have to own a home before an FHA cash-out refinance?
At least 12 months. At least one borrower must have owned and lived in the home as a primary residence for the 12 months before the FHA case number is assigned.
An inherited home is exempt, as long as it hasn't been rented out since you inherited it.
What credit score do I need for an FHA cash-out refinance?
HUD's minimum is 500 for loans at 90% of value or less, which covers every FHA cash-out, but lenders set their own floors and many require more.
A higher score earns a better rate, and a recent late mortgage payment matters more to approval than the score itself.
Can I get an FHA cash-out refinance with bad credit?
Possibly. FHA is more forgiving on scores and debts than conventional loans, but a cash-out also needs every mortgage payment on time for the past 12 months.
A recent late payment, not a low score, is the more common deal-breaker, and lenders with lower score floors usually charge higher rates.
Do I need an FHA loan to do an FHA cash-out refinance?
No. An FHA cash-out can replace any mortgage, conventional or FHA, and you can even cash out a home you own free and clear.
If the home has a mortgage, at least six payments must have been made on it, along with the ownership and payment-history rules.
Does an FHA cash-out refinance have mortgage insurance?
Yes. Every FHA cash-out pays an upfront premium of 1.75%, usually financed, and an annual premium of 0.50% on most 30-year loans, collected monthly.
Because the loan is at 80% of value or less, the annual premium lasts 11 years instead of the life of the loan.
How much does an FHA cash-out refinance cost?
In 2025 HMDA data, the median FHA cash-out refinance had total loan costs of $12,080, including the 1.75% upfront premium.
On top of closing costs, the annual premium adds about 0.5% of the balance a year for 11 years, which a conventional cash-out at 80% of value avoids.
Can I do an FHA cash-out refinance on a rental property?
No. FHA allows cash-out refinances only on owner-occupied primary residences that at least one borrower has lived in for the past 12 months.
For a rental, look at a conventional investment-property cash-out or a DSCR loan, which price higher and cap the loan lower.
Is an FHA or conventional cash-out refinance better?
With strong credit and enough equity, a conventional cash-out usually costs less because it has no mortgage insurance at 80% of value. FHA wins when your score or debt-to-income ratio would make conventional pricing expensive or approval unlikely. Get quotes for both on the same day and compare total cost.
Which lenders do the most FHA cash-out refinances?
In 2025 HMDA data, Rocket Mortgage made the most FHA cash-out refinances, about 21% of them, and the three largest lenders made 39%. Volume isn't price: the table above shows each lender's median rate and closing costs, which differ widely.
This guide is general information, not a lending decision. Program rules and dollar limits change — verify current figures with a licensed lender and confirm licensing at NMLS Consumer Access. See all loan types.
Nothing matches that. Try “refinance”, “FHA”, “Texas”, “Rocket” or “PMI”.