Explore the Mortgage101 Library
Check Local Mortgage Rates
Loan Program Choices
Use our calculator to find out your estimated monthly payment in advance: Enter the loan amount, interest rate, and length of mortgage.
Try our Mortgage Payment Calculator
A FHA cash-out mortgage refinance occurs when a homeowner chooses to refinance his FHA mortgage in order to receive the equity in cash. Some homeowners want to access the equity in their home to pay for their children’s education, purchase a car or make improvements on their home.
How the Equity Value is Determined
The equity of a home is the difference between the amount owed on the current mortgage and the value of the home based on a current appraisal. This dollar amount can become substantial because most homes appreciate over time. Improvements made by the homeowner will also increase the value of the home providing more equity in a shorter time frame.
Property and Homeowner Eligibility
The FHA, Federal Housing Administration, requires a second appraisal of the property and will allow a cash-out mortgage refinance with either an 85%, or a 95%, limit of the appraised value. The percentage allowed is based on the total loan value of the property. The homeowner must also be current on all payments, qualify for the new loan based on their credit and have lived in the home for the past 12 months. The new, larger FHA mortgage will replace the old FHA mortgage at the current market interest rate.
- Should You Refinance? Make Sure the Timing is Right
- 3 Common Short Sale Mistakes
- Appraisal Basics
- What To Do When Mortgages Default
- 3 Warning Signs of Loan Modification Scams
- FHA Eligibility with Bankruptcy and Foreclosure
- Short Selling a Rental Property
- 3 Reasons Banks Reject Short Sales
- Alternatives to Getting a 2nd Mortgage