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What is an FHA cash out refinance?

An FHA cash out refinance allows you to tap into the value of your home's equity to get cash for important expenses. With this type of refinancing, you'll replace your current mortgage with a new loan for a higher amount. The difference between the two mortgages is what you'll receive in cash at closing. For example, if you have a mortgage with a loan balance of $200,000, you might be able to get a new FHA loan for $250,000. This would give you $50,000 in cash at closing.

You can use the money to pay for home improvements and college educations, or to pay down high-interest debts. FHA cash out refinances require a new loan application and you'll need to meet the requirements to get your refinance approved.

Get cash from home equity

Consolidate debts

Pay for home renovations

Pay for college educations

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How much cash can you get?

The amount of cash you might get from a cash out refinance depends on the value of your home’s equity and the loan-to-value ratio of your refinance. Change the default values to personalize your estimate!

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Calculator assumes your loan-to-value ratio is 80%. This calculator is made available as a self-help tool for your personal use. We do not guarantee its accuracy or applicability to your individual circumstances. Resulting calculations are for illustrative and informational purposes only and are not intended as investment or financial advice. Consult a qualified financial advisor before making important personal finance decisions. To get a better understanding of the benefits of refinancing, speak with a loan advisor at Freedom Mortgage.

You might qualify for $50,000

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Ask about our FHA cash out refinance rates

At Freedom Mortgage, we want to help you make the most of your home's equity with competitive rates for FHA cash out refinances. Your credit score, finances, current market and other factors can affect the rate we may be able to offer you. We're happy to answer your questions and see if you qualify!

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Is an FHA cash out refinance right for you?

FHA cash out refinancing can provide you with the financial flexibility to reinvest your home's equity in other parts of your life.

FHA Icon

FHA cash out refinances

  • All qualified homeowners are eligible
  • Maximum loan-to-value ratio often 80%
  • Minimum credit score often 550
  • Mortgage insurance required
  • No funding fee
Learn More
Conventional icon

Conventional cash out refinances

  • All qualified homeowners are eligible
  • Maximum loan-to-value ratio often 80%
  • Minimum credit score often 620
  • Mortgage insurance not required with home equity 20% or more
  • No funding fee
Learn More
VA Icon

VA cash out refinances

  • Only qualified veterans, military personnel, and surviving spouses are eligible
  • Maximum loan-to-value ratio often 90%
  • Minimum credit score often 550
  • Mortgage insurance not required
  • Most veterans will pay a funding fee of 2.3% to 3.6% of loan amount
Learn More
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What Our Customers Say

Check out the reviews from some of our customers.

Reviews and comments have been submitted by customers voluntarily and are solely their views. Customers were not compensated for their reviews/comments but were informed that they may be used in Freedom Mortgage Corporation marketing. Customer experiences are not meant to suggest future performance and may not be representative of your experience.

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FHA cash out refinance requirements

In order to be eligible for an FHA cash out refinance, you'll need to have a significant amount of home equity. Lenders will typically measure your home equity using a loan-to-value ratio (LTV). Your application will only be approved if you meet the lender's credit, income, and financial standards. Take a look at the other factors that go into FHA cash out refinancing.

New application and documentation

You'll need to submit proof of income, tax returns, and other documents that provide your financial history.

New home appraisal

Your home's fair market value may have changed since you bought it. Lenders typically require a new home appraisal to determine how much home equity you have. Home appraisals can cost around $300.Learn about FHA home appraisals

Loan-to-value ratio

The maximum loan-to-value-ratio (LTV) for FHA cash out refinances is often 80%. Your LTV helps lenders decide if you qualify for cash out refinancing and how much cash you may be able to borrow against your home's equity. Learn about LTV

New credit check

You should expect a credit check as a part of the approval process. Higher credit scores might get you a lower interest rate. Learn about cash out credit scores

Closing costs

FHA cash out refinance closing costs can vary but will always include the Upfront Mortgage Insurance Premium (UFMIIP). You may also need to pay lender fees, mortgage points, or other costs. Learn about FHA closing costs

Loan disclosures and closing

After you apply, you'll also need to sign Disclosures before you close. We'll review your closing steps with you when the time comes so you're prepared.Learn about loan disclosures

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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 easier requirements than other types of cash out refinances. Remember you will increase what you owe on your mortgage with an FHA cash out refinance. You may pay more in interest over the life of your refinanced mortgage than you would have with your original mortgage.

Many homeowners find that the equity in their houses can help them fund big expenses. FHA cash out refinances can help you pay for college tuition or to pay for home renovations. Certain renovations can also increase your home's value.

An FHA cash out refinance can also help you consolidate your debt. If the interest rates on other debts are much higher than your mortgage rate, it can sometimes be beneficial to refinance and use cash from your home’s equity to pay down these debts. Learn more about refinancing to consolidate debts.

Freedom Mortgage Corporation is not a financial advisor. The ideas outlined above are for informational purposes only, are not intended as investment or financial advice, and should not be construed as such. Consult a financial advisor before making important personal financial decisions.

The amount of cash you can get from an FHA cash out refinance depends on the amount of equity you have in your home and the loan-to-value ratio of the refinance (which is often no higher than 80% for FHA cash out loans). For example, pretend these numbers describe your home and mortgage:

Home Value $285,000
Current mortgage balance $145,000
Sample maximum LTV 0.8 or "80%"
Maximum new mortgage balance $228,000 ($285,000 x 0.8)
Maximum cash available $83,000 ($228,000 - $145,000)

In this case you can see $228,000 would be your maximum new mortgage balance, which is 80% of the home value. Because you built up a substantial amount of equity in your home, you may be able to refinance and get up to $83,000 in cash.

Keep in mind that you typically have to pay closing costs when you get an FHA cash out refinance. You may be able to roll some of these closing costs into your loan amount. However, this will reduce the amount of cash you have available to you.

  • Proof of payment and financial history

You will need to complete a new application demonstrating your income and financial history. A cash out refinance application will also require proof of mortgage payments for the previous 12 months.

  • Credit score

At Freedom Mortgage, you can often qualify for an FHA cash out refinance with a credit score as low as 550. Other lenders may have different minimum credit scores for their cash out refinances.

  • Loan-to-value ratio

Your loan-to-value (LTV) ratio determines how much you can borrow against your home’s equity. LTV is calculated by dividing your mortgage amount by the value of your home. For example, if your home is worth $275,000 and you owe $165,000 on your existing mortgage, then your LTV is 60% ($165,000 ÷ $275,000 = .6 or 60%).

When you get a cash out refinance, your LTV increases. Many FHA cash out refinances limit your LTV to a maximum of 80%. Take a look at this sample calculation, which also estimates how much cash might be available from the home’s equity.

Home Value $275,000
Current mortgage balance $165,000
Sample maximum LTV 0.8 or 80%
Maximum new mortgage balance $220,000 ($275,000 x 0.8)
Maximum cash available $55,000 ($220,000 - $165,000)

Your maximum cash available in this scenario does not account for closing costs. When you add closing costs to your loan amount, you will have less cash available to you. For example, if the above example comes with $8,000 in closing costs, this reduces the maximum cash available to $47,000.

  • Principal residence

In order to receive an FHA cash out refinance, the home you are looking to refinance must be your primary residence. It will have to be considered your primary residence for at least the 12 months prior to your FHA cash out refinance application.

  • Appraisal and home equity

Your home’s value may have changed since you bought it based on the market and surrounding properties. An appraisal will help determine how much your home is currently worth and how much equity you have. Lenders use this information to decide whether you qualify for a loan and what mortgage amount they might approve.

  • Closing costs

You will need to pay closing costs with an FHA cash out refinance, including the Upfront Mortgage Insurance Premium (UFMIP). In total, these closing costs typically average between 3% and 4% according to the U.S. Department of Housing and Urban Development (HUD). If your new loan amount is $220,000, you might pay between $6,600 and $8,800 in closing costs.

  • Mortgage insurance premiums

You’ll pay mortgage insurance premiums as part of your monthly bill with an FHA cash out refinance, just like you will with other types of FHA loans.

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The Freedom Mortgage Difference

We are committed to making you a life-long customer with exceptional mortgages and exceptional service!

We’ll help you choose the right mortgage and work with you to make buying a home or refinancing easy. We'll also keep an eye on your rate and let you know when you can lower your payment or get cash from your home's equity.

We are thankful for our 1.5 million customers. It’s because of homeowners like you that we’ve grown over the past 30 years to become one of the top lenders in America.

We are proud to support veterans and service members with charitable work like raising $93,000 to buy school supplies for military families. We are also committed to fighting hunger in communities across the nation.