The Quick Read: It depends on how much cash you take. A conventional cash-out refinance on a home you live in tops out at 80% loan-to-value, which is the line where mortgage insurance starts, so most of those loans carry none. Mortgage insurance returns to the payment on limited cash-out loans and on government-backed loans, where it shows up as its own line next to principal and interest. FHA has its own premium, and VA charges a one-time funding fee instead.
What Mortgage Insurance Actually Is
Mortgage insurance protects the lender, not you. If you stop paying, it does not shield you from foreclosure. The CFPB explains that private mortgage insurance usually applies to a refinance of a conventional loan when your equity is under 20 percent of the home’s value.
Cash-out refinance estimate
The starting figures are an example value with a balance and a cash request in proportion. Replace them with yours.
Editable benchmark: 7.40% as of October 15, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the agency cap on a one-unit principal residence, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a cash-out refinance quote; a cash-out loan is priced by the lender at lock. The cash available is the loan the program cap allows less the balances paid off, before closing costs, which are not included. The HELOC line is the program’s combined loan-to-value ceiling applied to the same value and balance. Taxes and insurance are editable estimates. Licensed in sixteen states for consumer mortgages.
The premium can be monthly, upfront, or split between the two. A monthly premium adds to your payment each month. An upfront premium is paid at closing or built into the loan balance. Either way, it is a separate line from principal and interest.
Here is the part that trips people up. Cash-out and limited cash-out are different transactions, and mortgage insurance treats them differently. Keep them apart and most of the confusion goes away.
How the Payment Is Built, Step by Step
Across the wholesale programs Lendmire places files with, the mortgage insurance question gets settled in the same order every time.
1. Pick the loan purpose. Full cash-out, limited cash-out (rate-and-term), FHA Streamline, VA IRRRL and VA cash-out are separate transactions. Each has its own insurance treatment.
2. Let the appraisal set the denominator. The new loan amount divided by the appraised value gives the loan-to-value ratio. The more cash you take, the higher that number climbs.
3. Test the ratio against 80%. On a conventional loan, mortgage insurance is required above 80% LTV. At or below 80%, it is not. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
4. Choose how the premium is paid. Monthly, upfront, or split. On a limited cash-out, the upfront piece can often be rolled into the balance.
5. Check the coverage level and credit profile. Credit score and leverage drive the premium. Published typical annual premiums on conventional loans run within a range of roughly 0.58% to 1.86% of the balance. That is a range, not a quote, and your file sets the actual figure.
6. Read the Loan Estimate. The monthly premium appears in the Projected Payments box on page 1. An upfront premium appears on page 2, section B.
The lender then adds the insurance to the housing payment it tests against your income. A higher payment can tighten the debt-to-income ratio, so insurance affects qualifying as well as budgeting.
Why Full Cash-Out Usually Skips Mortgage Insurance
A conventional full cash-out on a one-unit primary residence is capped at 80% LTV. On two- to four-unit principal residences, second homes and investment property, the cap drops to 75%. The Fannie Mae Eligibility Matrix sets these caps by transaction, occupancy and unit count. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Because insurance applies only above 80%, a standard full cash-out generally stays under the trigger. The tradeoff is simple. Keeping the loan at or below the cap avoids conventional mortgage insurance, but it also limits how much cash you can take.
There is also a seasoning rule. The first mortgage being paid off must be at least 12 months old, measured note date to note date, and a borrower must have been on title for 6 months. Delayed financing, inheritance and legal-award exceptions exist. Subject to lender guidelines.
One wholesale lane goes further. It reaches 89.99% LTV with no mortgage insurance on a thirty-year fixed, primary residence, conforming-balance loan. It needs a 680 score and a 50% ratio ceiling, plus its own six months of seasoning. In Texas, a cash-out on the homestead is capped by the state constitution at the agency figure, so that lane is not written there. This is one of the few ways to pull more equity without a premium line. Not every file fits it. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Where Limited Cash-Out Brings Insurance Back
A limited cash-out refinance, often called rate-and-term, pays off the existing first mortgage, the closing costs and a purchase-money second lien. Only incidental cash comes back. Because the loan does not pull meaningful equity out, leverage can run much higher.
The limited cash-out program allows 95% LTV on a one-unit principal residence. The limit rises to 97% where the existing loan is agency-owned and the first-time-buyer program allows it. The 95.01% to 97% tier carries extra conditions under Fannie Mae’s limited cash-out rules. The existing loan must be owned or securitized by Fannie Mae, the loan must be fixed-rate, the home must be a one-unit principal residence, and underwriting runs through Desktop Underwriter. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Mortgage insurance applies above 80% here. On a conventional loan, that means any loan above 80% of the value needs coverage, and the premium is priced on the loan, not as a flat add-on. That is why a “small” cash-out can still carry a premium. If the transaction is classified as limited cash-out and leverage is high, insurance is part of the payment.
Fannie Mae also allows the upfront premium to be financed into a limited cash-out loan, as long as the total stays within the loan limit. That raises the balance slightly and spreads the cost across the payment instead of the closing table.
How Cash-Out Size Moves the Payment
Picture a homeowner whose home has 30% equity, so the existing loan sits near 70% of value. The homeowner is looking at how far to push the new loan. These are illustrations in percentages only, not quotes.
| New loan vs. value | Loan type | Insurance in payment? |
|---|---|---|
| 70% to 80% | Conventional full cash-out | No |
| Above 80% to 89.99% | Wholesale no-MI lane, if the file fits | No |
| 90% to 95% | Limited cash-out only | Yes, and little cash back |
| Above 95% to 97% | Limited cash-out, agency-owned loan | Yes, and little cash back |
At 70%, nothing changes except a larger principal and interest payment on the bigger balance. At 80%, the loan reaches the standard cap and still carries no insurance. Between 80% and 89.99%, the wholesale lane described above can still avoid a premium line, but only for primary residences that meet its score, ratio, balance and seasoning conditions, and not in Texas on a homestead. Once a file falls outside that lane, standard conventional cash-out stops at 80%, and higher leverage means the limited cash-out product, which gives almost no cash and carries insurance.
A bigger loan also changes the math on a percentage-based premium. Insurance is priced against the balance, so a larger balance means a larger premium at the same pricing tier. Credit score matters too. A stronger score generally lands in a lower tier.
What does not change: property taxes and homeowner’s insurance, if you escrow them. Those carry over. The new term resets the amortization clock.
Government Loans: FHA and VA Work Differently
The conventional 80% line does not govern these loans. They run on their own rules.
| Program | Insurance or fee | How it’s paid | How it ends |
|---|---|---|---|
| Conventional | Private mortgage insurance above 80% LTV | Monthly, upfront or split | Cancels at 80%, ends at 78% |
| FHA | Upfront and annual premium | Upfront financed; annual monthly | Follows HUD rules |
| VA | One-time funding fee | Paid at closing or financed | No monthly premium |
FHA. HUD’s FHA Answers page says most FHA programs collect an upfront premium at closing and an annual premium in monthly installments. The upfront premium on a purchase, refinance or Streamline is 1.75% of the base loan amount. Streamlines of FHA loans endorsed on or before May 31, 2009 carry reduced premiums. The annual premium varies by LTV, term and loan size, so no single number applies. HUD publishes the tiers in its Handbook 4000.1 library.
The FHA Streamline needs an existing FHA loan. It involves no appraisal and limited credit review, and it must show a net tangible benefit. An FHA rate-and-term with an appraisal reaches 97.75% LTV. Subject to lender guidelines.
VA. VA loans carry no monthly mortgage insurance. VA charges a funding fee once: 2.15% on a first-use cash-out, 3.3% after first use, and 0.5% on an IRRRL. Certain disabled veterans and surviving spouses are exempt. Confirm the current table on VA.gov before relying on any figure.
The IRRRL cannot pay out cash. A veteran who wants equity needs a VA cash-out. The IRRRL also requires no VA appraisal, a net tangible benefit, and seasoning of the later of 210 days and 6 payments.
Where the Rule Breaks
The general rule is that full cash-out stays under the trigger. A few cases bend it.
- A “small” cash-out that counts as limited. If the cash back is incidental, the file is limited cash-out. Leverage can run to 95% or 97%, and insurance applies. Rate-and-term is not a way to dodge the premium.
- Lender-paid mortgage insurance. The lender covers the premium through a higher interest rate. The CFPB’s examination manual notes that this type cannot be cancelled by the borrower or automatically terminated. You trade a visible line for a permanent cost.
- Two- to four-unit homes. Full cash-out falls to 75%, so insurance rarely comes up, but cash is limited further.
- High-LTV relief refinances. Fannie Mae’s matrix notes that acquisition of high LTV refinance loans is suspended. Don’t plan around that product.
- Jumbo loans. Above the conforming limit, jumbo lanes take over. They carry a 660 decision score, leverage to 90%, loans up to $5,000,000, and a 50% ratio ceiling on the fixed lanes. Their insurance and leverage rules differ from conforming loans.
- Coming out of FHA. A conventional cash-out at or below 80% LTV can end FHA mortgage insurance. Compare the new payment before you assume it will.
Rounding matters at the margins. Freddie Mac rounds LTV up to the next whole number, so 94.01% is treated as 95%.
Can the Insurance Come Off Later?
On a conventional loan, yes. The CFPB’s cancellation guidance says you may ask the servicer to cancel when the balance is scheduled to reach 80% of the home’s original value. The request needs a good payment history, no subordinate liens, and no decline in value. The servicer must terminate it automatically at a scheduled 78%.
Here’s the catch with a refinance. It is a new loan, so “original value” starts over with the new appraisal. Your old clock does not carry forward. Someone who refinanced into a high-LTV loan resets the countdown.
Those cancellation rights cover private mortgage insurance on conventional loans. FHA follows HUD’s own rules. If a premium came with the old loan, an unearned portion may be refundable in limited cases when moving into another FHA loan. Ask the lender and check HUD’s guidance. A VA funding fee is not refunded in the same way.
What the Borrower’s Decision Looks Like
Run the decision in this order.
1. Decide how much cash you actually need. Every point of leverage above 80% on a conventional loan adds a premium line, unless the file fits the wholesale lane that reaches 89.99% without insurance.
2. Compare the programs side by side. A conventional full cash-out at or below the cap, a high-leverage lane with no insurance, a limited cash-out with insurance, or a government loan with its own cost.
3. Look at the whole payment. Principal and interest, insurance, taxes and homeowner’s insurance together. Then check what that does to your debt-to-income ratio.
4. Ask what ends the insurance and when. Cancellation, termination or a later refinance.
5. Read the Loan Estimate line by line. The insurance appears in Projected Payments and section B.
Lendmire arranges these loans through wholesale lenders, and the team can lay out cash-out refinance programs next to a rate-and-term option so the payment difference is visible before you commit.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Key Terms Defined
Loan-to-value (LTV): The new loan amount divided by the appraised value of the home.
Private mortgage insurance (PMI): Coverage on a conventional loan that protects the lender if the borrower defaults.
Limited cash-out refinance: A refinance that pays off the old loan and costs, with only small incidental cash back.
Funding fee: A one-time charge on VA loans that replaces monthly mortgage insurance.
Mortgage insurance premium (MIP): The FHA’s insurance charge, with an upfront piece and an annual piece paid monthly.
Seasoning: How long you have held the loan or the title before a refinance is allowed.
Frequently Asked Questions
Does a cash-out refinance always require mortgage insurance?
No. A conventional full cash-out on a one-unit primary residence stops at 80% LTV, and insurance applies only above 80%. FHA cash-out still carries FHA premiums, and VA replaces insurance with a funding fee. The loan type decides the answer. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Can I roll the upfront premium into the new loan?
Often yes. Fannie Mae allows a financed premium on a limited cash-out refinance if the total stays inside the loan limit. That raises the balance and the payment slightly instead of adding to closing costs. FHA’s upfront premium can also be financed into the base loan.
Do I get a refund of the insurance from my old loan?
Usually not. The CFPB notes that if you paid an upfront premium and then refinance, you might not be entitled to a refund. FHA has a narrow case for an unearned portion when you move into another FHA loan, so ask your lender and check HUD guidance.
Will mortgage insurance affect whether I qualify?
It can. Insurance raises the housing payment the lender tests against your income. A stronger credit profile may lower the premium tier. Most files are subject to a total ratio ceiling of 50%, subject to lender guidelines and full file review.
Can I get rid of FHA mortgage insurance by refinancing?
Sometimes. Compare the new payment and closing costs against what you pay now, since a new loan resets terms. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches. To see your own scenario, request a review with Lendmire.
For current guidelines and terms, see Lendmire’s refinance programs page.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. CFPB – What is private mortgage insurance?
2. Fannie Mae Eligibility Matrix
3. Fannie Mae Selling Guide B2-1.3-02 Limited Cash-Out Refinance
4. HUD FHA Answers – Mortgage insurance premium structure
5. HUD Handbook housing library
7. CFPB HPA examination procedures
8. CFPB – When can I remove PMI from my loan?
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Should You Choose a Cash-Out Refinance or Keep Your Mortgage? · How to Refinance a Mortgage for Cash Out After Your Home Value Rises · Can You Drop Mortgage Insurance With a Cash-Out Refinance?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.