What is an FHA Cash-Out Refinance?

FHA Cash-Out Refinance Definition

An FHA cash-out refinance loan is a subtype of the organization’s popular 203(b) loan but designed specifically for those with existing FHA loans and conventional mortgages who want to refinance their home mortgage and extract equity to be used for whatever they wish. In this situation, homeowners pay off their existing mortgage, while rolling additional funding in with the payout amount.

The result is a larger loan, but also more available cash. Note that the FHA requires anyone interested in a cash-out refinance to have a minimum of 15% equity in their homes. This is much lower than what is required for a HECM reverse mortgage.


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