An FHA cash-out refinance replaces your current mortgage (FHA or not) with a new FHA-insured loan of up to 80% of your home's value, and pays you the difference. It's only available on the home you live in.
FHA cash-out rules (HUD Handbook 4000.1, II.A.8.d.v)
- Maximum: 80% of the appraised value, for the new loan and any loans that stay in place.
- Ownership and occupancy: at least one borrower must have owned and lived in the home as their primary residence for 12 months before the FHA case number is assigned. Inherited homes have an exception if they weren't used as a rental.
- Payment history: every mortgage payment over the last 12 months (or since you got the loans, if less) must have been made in the month it was due. The current mortgage needs at least 6 months of payments. A home with no mortgage can also qualify.
- After forbearance: you need to have finished the plan and then made 12 consecutive on-time payments.
- Primary homes only: rentals and second homes aren't eligible, and a non-occupant co-borrower's income can't be used to qualify.
- Loan limit: the loan can't exceed your county's FHA limit — see Colorado and Florida.
FHA mortgage insurance on a cash-out
| Rate | |
|---|---|
| Upfront MIP (added to the loan) | 1.75% of the base loan |
| Annual MIP, term over 15 years, loan up to $726,200 | 0.50% |
| Annual MIP, term over 15 years, loan above $726,200 | 0.70% |
| Annual MIP, term 15 years or less, loan up to $726,200 | 0.15% |
| How long annual MIP lasts (at 80% LTV or less) | 11 years |
Source: HUD Handbook 4000.1 Appendix 1.0 and Mortgagee Letter 2023-05. Because cash-outs are at 80% or less, annual MIP drops off after 11 years rather than lasting for the life of the loan.
Worked example
| Amount | |
|---|---|
| Appraised value | $400,000 |
| Base loan at 80% | $320,000 |
| Upfront MIP (1.75%) | $5,600 |
| Total loan | $325,600 |
| Current payoff | $200,000 |
| Cash before closing costs | $120,000 |
| Principal & interest at an example 6.75%, 30 years | about $2,112/month |
| Annual MIP (0.50%) | about $133/month |
FHA cash-out vs. conventional cash-out
Both cap you at 80% on a primary home. Conventional has no mortgage insurance at that level, so it's usually cheaper if your credit is strong. FHA can make sense when your credit score or debt-to-income ratio makes conventional pricing expensive or out of reach. Compare both in the cash-out calculator and see FHA vs. conventional.
If you already have an FHA loan
If you don't need cash and just want a lower rate, an FHA Streamline refinance is usually simpler. A cash-out is the route when you want to take equity out.
Local FHA guides
FHA limits vary by county. Find your city's figures in our Colorado and Florida FHA guides, for example Denver, Colorado Springs, Tampa and Orlando, or the FHA loan calculator for payments.
FHA cash-outs with Tayton Capital
We arrange FHA cash-out refinances for homeowners across Colorado and Florida, and compare FHA against a conventional cash-out on your file so you can see which leaves you with more cash and a lower payment. Call (970) 708-9624 or request a quote.
Frequently asked questions
How much can I take out with an FHA cash-out refinance?+
Up to 80% of your home's appraised value, minus what you owe and closing costs. The loan also can't go over your county's FHA limit.
How long do I have to live in my home for an FHA cash-out?+
At least one borrower must have owned and lived in the home as their primary residence for 12 months before the FHA case number is assigned.
What is the MIP on an FHA cash-out refinance?+
1.75% upfront, added to the loan, plus annual MIP. On a loan longer than 15 years up to $726,200, annual MIP is 0.50%, and it lasts 11 years because cash-outs are at 80% LTV or less.
Can I do an FHA cash-out on a rental property?+
No. FHA cash-out refinances are only for owner-occupied primary residences.
Do I need an FHA loan now to get an FHA cash-out?+
No. You can refinance a conventional or other loan into an FHA cash-out as long as you meet FHA's occupancy, payment and credit rules.