FHA Cash-Out Refinance Loan
What is an FHA cash-out refinance?
You may be surrounded by money you don’t even know you have! An FHA cash-out refinance allows you to access cash that’s otherwise tied up in your home. You can borrow up to 80% of the appraised value of your property, so if you have sufficient equity (the difference between the value of your home and the amount you owe on your mortgage), you can refinance your current mortgage and still receive cash to use as you wish.
Benefits of an FHA cash-out refinance
An FHA cash-out refinance uses the equity in your home to provide cash with a lower mortgage interest rate than most personal financing options, such as a credit card. These funds can help you improve your finances or achieve personal goals, such as paying for:
- College tuition
- Home improvement projects
- A car loan or a new car
- Higher-interest debt
In addition, you may be able to improve your mortgage’s terms through an FHA cash-out refinance in the following ways:
- Lower your interest rate
- Change your loan term
- Replace an adjustable-rate mortgage with a fixed-rate mortgage
What should you consider?
While an FHA cash-out refinance comes with many benefits, all FHA loans require mortgage insurance in the form of an upfront premium at closing and an annual mortgage insurance premium that is paid monthly. This lasts for the life of your loan. If your home has significant equity, you may benefit more from a conventional cash-out refinance.
FHA cash-out refinance guidelines
When you apply for an FHA cash-out refinance, we’ll review your income, assets, credit history, and order a new appraisal of your property. The FHA requires borrowers to meet specific debt-to-income ratio guidelines in certain circumstances and have a history of on-time mortgage payments.
It’s important to note that FHA cash-out refinance loans are strictly for owner-occupied properties. Additionally, if you’ve lived in your home for less than a year, the lower of either the appraised value or original purchase price will be used to calculate the maximum loan amount.
FHA cash-out refinance loan requirements
- You must have a credit score of at least 500 (additional conditions may apply)
- You must have made all mortgage payments on time for the past 12 months
- You cannot owe more than 80% of your home’s value before or after refinancing
- You can only refinance a primary residence
We’re here to put your home equity to work for you with an FHA cash-out refinance.
Refinance tools and resources
Related articles
How Much Does It Cost to Refinance a Mortgage?
What Is a Cash-Out Refinance?
What Is Loan-to-Value (LTV) Ratio?
What Are the Pros and Cons of Refinancing Your Home?
