An FHA cash out refinance allows you to get cash from your home’s equity. It replaces your current FHA mortgage with a new FHA mortgage for a higher amount. At closing, you’ll receive the difference between the two loans in cash.

FHA cash out refinances can have competitive rates and lower minimum credit scores compared to conventional cash out refinances.

How much cash you might get from your home’s equity depends on three things: your home’s current value, your current mortgage balance, and the maximum loan-to-value ratio (LTV) of the refinance.

FHA cash out refinances don’t let you borrow the full value of your equity. Instead, you can only borrow some of its value based on the refinance’s LTV. We usually offer 80% maximum loan-to-value ratios on FHA cash out refinances at Freedom Mortgage. Check out this example:

Here, the homeowner might be able to increase their FHA loan balance to $280,000 or 80% of the home’s value.

To get the estimated available cash, subtract the mortgage balance from the new maximum mortgage balance and get $30,000. You can use the calculator on this page to estimate how much cash you might get from your equity.

Remember, an FHA cash out refinance has closing costs you need to pay or add to your loan amount. When you add these costs to your loan, you might be able to borrow less cash as a result.

You’ll have to complete a new loan application, submit documents, and meet financial criteria to get your refinance approved. Other requirements include:

• Home equity. You need a substantial amount of home equity to qualify for cash out refinancing. Learn more about home equity.
• Credit score. At Freedom Mortgage, 550 is often our minimum credit score for FHA cash out refinances.
• Home appraisal. You’ll likely need a new appraisal to estimate your home’s current value. This helps us determine how much equity you have.
• Title search. A title search checks for liens or other claims on the home. We’ll probably require a new title search.
• Mortgage Insurance Premiums (MIP). You’ll pay an upfront mortgage insurance premium as part of your closing costs with an FHA cash out refinance. You’ll also pay monthly premiums. Learn more about FHA mortgage insurance.
• Closing costs. You need to pay closing costs which average between 3% and 4% of the loan amount according to the U.S. Department of Housing and Urban Development (HUD). This total includes the upfront mortgage insurance premium.
• Disclosures and closing. You’ll need to sign disclosures and attend closing to finalize your refinance. Learn more about our loan application process.

FHA cash out refinancing increases the amount of money you owe on your mortgage. As a result, you’ll probably pay more in interest over the life of your new loan.

FHA cash out refinances can also increase the number of years on your mortgage. This might also increase how much you pay in interest. Learn more about cash out refinancing pros and cons.

The FHA cash out rate we may be able to offer is personal to you. Your rate is affected by your credit score, your income and finances, and the value of your home’s equity as well as the current mortgage market environment.

We may be able to offer you a rate that is lower—or higher—than the rate you see advertised by other lenders. Ask us today what FHA cash out rate we can offer you by calling 877-220-5533 .