The Quick Read: An FHA cash-out is a brand-new FHA loan, so it starts a new mortgage insurance clock. Annual mortgage insurance premium (MIP) on this loan typically ends only by waiting out its term, refinancing into a conventional loan, or paying the loan off. Paying down the balance or watching your home gain value will not cancel it. The plan has to be built before you take the cash.
Key Takeaways
- A cash-out refinance reaches 80% of your home’s value, and that cap decides how long annual MIP lasts on the new loan.
- On a thirty-year FHA loan at or below 90% LTV (loan-to-value, the loan as a share of the home’s value), annual MIP ends after eleven years. Above 90%, it lasts the full term.
- You also pay a one-time upfront premium of 1.75% of the base loan, usually financed into the balance.
- The cash you take lowers your equity, and equity is what a later conventional exit depends on.
- Planning an exit means choosing how much cash to take, what to use it for, and which route you want to land on.
What Does an FHA Cash-Out Do to Your MIP?
It replaces your old loan with a new one, and the new loan sets its own insurance terms. You get a new case number, a new upfront premium, and a new annual premium schedule. The old loan’s history does not carry over.
Many borrowers assume the old clock keeps running. It does not. The refinance pays off the existing mortgage, and the new FHA loan is measured from its own start.
Across the wholesale programs Lendmire places FHA files with, the cash-out structure is consistent. The home must be owned and occupied as your principal residence for 12 months before the case number is assigned. The loan can reach 80% LTV against a new appraisal. The payoff of your current mortgage, any cash to you, financed costs, and the financed upfront premium all have to fit inside that limit. Lendmire’s FHA cash-out refinance program page lays out how that structure works. Every figure here is subject to lender guidelines and full file review.
Two parts make up FHA mortgage insurance:
- Upfront premium: 1.75% of the base loan. Most borrowers finance it, which raises the balance.
- Annual premium: a percentage of the balance, charged through monthly payments. The percentage depends on term, loan amount and LTV, and the program range runs from 0.15% to 0.75%.
That 1.75% upfront premium is a program fact, not a price quote. Your Loan Estimate shows exactly what applies to your file.
How Long Does Annual MIP Last on the New Loan?
On a thirty-year FHA loan at or below 90% LTV, annual MIP ends after eleven years. Above 90%, it lasts for the loan’s term. Because a cash-out tops out at 80%, a properly structured cash-out should land in the eleven-year group. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Here is the reasoning, labeled as inference. For loans with case numbers assigned on or after June 3, 2013, HUD’s Mortgagee Letter 13-04 says FHA collects annual MIP for the maximum duration the statute permits. The statute splits that duration at 90% LTV. Your cash-out sits under 80%, and the new loan carries its own case number. So the eleven years should run from the new loan, not the old one. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
No single HUD page says all of that in one sentence. Treat it as a planning conclusion and ask your loan officer to confirm it against your specific file.
A contrast helps here. An FHA rate-and-term refinance can reach 97.75% on a principal residence you have occupied for the previous twelve months. On a thirty-year term, that leverage is above 90%, so annual MIP would last the term. The extra leverage costs you a longer insurance period. If you want cash, the cash-out’s lower ceiling happens to work in your favor on duration.
Why Won’t Equity or an Appraisal Cancel It?
Cancellation by equity is a feature of conventional private mortgage insurance (PMI), not FHA. A federal law, the Homeowners Protection Act, gives conventional borrowers set rights to request cancellation and to see automatic termination. The CFPB’s bulletin on PMI cancellation explains those rights. They cover PMI only. They do not give FHA borrowers a right to cancel FHA MIP.
Older FHA loans did work differently. For loans with case numbers assigned before June 3, 2013, HUD cancels annual MIP once the balance falls to a set share of the original value, after a minimum payment period. HUD’s answer on pre-2013 loans also says new appraised values are not used for that test. So even on the old rules, a rising home value did not speed things up.
Here is the catch for cash-out borrowers. If your current FHA loan has a pre-2013 case number, a cash-out replaces it with a post-2013 loan. You could be giving up a cancellation path you already had. Check the case-number date before you refinance. That check is an inference from the case-number rules, so confirm it with your loan officer.
The Exit Routes Side by Side
You have five realistic ways out. Only some of them end mortgage insurance.
| Route | What it takes | The catch |
|---|---|---|
| Wait out the term | Pay on schedule through the MIP period | Insurance runs the full period |
| Refinance to conventional | Equity, credit, income, appraisal | Qualification is reviewed at that time |
| Conventional with PMI | Less equity than a no-PMI loan | You swap MIP for PMI |
| FHA streamline or FHA-to-FHA | Existing FHA loan, net tangible benefit | Premium continues; not an exit |
| Sell or pay off | A sale or payoff funds | Ends the loan, not just the premium |
Those are the routes. The sections below explain how each one plays out after a cash-out.
Wait it out. You pay annual MIP monthly until the eleven years end. This is the simplest path and requires nothing but on-time payments. It costs the most in total premium.
Refinance to conventional. This is the main exit. It ends FHA MIP, but the new conventional loan follows its own rules. Whether you can do it depends on your equity, credit, income and appraisal at that time. Guidelines change, so keep your expectations flexible.
Conventional with PMI as a bridge. If your equity is thin, a conventional loan may still be available with PMI. You trade one insurance for another. The difference is that PMI follows the conventional cancellation rules above, so it can end as your equity grows. That can be a smart interim step, depending on your numbers.
FHA streamline. A streamline refinances an existing FHA loan with no appraisal and a limited credit review, but it requires a net tangible benefit, and the premium continues. It lowers cost in some cases. It does not end MIP.
Sell or pay off. Both end the loan and its insurance. Neither is a refinance strategy, but if you plan to move within the MIP period, the premium may matter less than you think.
Build the Exit Plan Before You Close
Start with the exit, then work back to the loan. Here is the sequence a broker walks through.
1. Decide the target. Pick the route you want, such as a conventional refinance, and the timeframe you can live with.
2. Size the cash. Every dollar you take out lowers your equity, so take what the purpose needs. A smaller draw leaves a thicker cushion for the later exit.
3. Check the old loan. Look at the case-number date and whether the existing loan is FHA. A pre-2013 loan has a cancellation path you would be trading away.
4. Ask about the upfront credit. If your current loan is FHA and fairly new, you may get a partial credit toward the new loan’s upfront premium. More on that below.
5. Compare against conventional now. Ask whether a conventional cash-out works for your file today. It may avoid FHA mortgage insurance altogether, though it may bring PMI instead, depending on leverage and credit.
6. Set checkpoints. Revisit your equity, credit and income each year. Your home’s value and your payoff pace decide when the exit opens.
Be honest with yourself on step 2. Cash-out moves the exit date out. You are borrowing against equity that would otherwise help you leave FHA mortgage insurance sooner. That trade can be worth it, but it is a trade.
Does the Old Upfront Premium Come Back?
Only as a credit, and only if the new loan is FHA. HUD’s homeowner notice on refunds says you may be eligible for a refund of part of the upfront premium when you refinance into another FHA mortgage. The refund is applied toward the new loan’s upfront premium. It is not paid to you as cash. The same notice warns that the refund rules are subject to change.
This matters for your exit plan. Moving to a conventional loan forfeits that credit. If you refinanced from a conventional loan into FHA, no credit exists at all. Ask your loan officer to confirm what applies to your file instead of relying on a circulating chart.
How Does Your Use of the Cash Change the Exit?
What you do with the cash changes your equity picture. The effect is simple to model.
| Use of cash | Effect on equity | Effect on exit |
|---|---|---|
| Pay off high-cost debt | Equity drops, other debt falls | Exit date later, budget freer |
| Home improvements | Equity drops, value may rise | Appraisal may help later |
| Spend it | Equity drops, no offset | Exit date pushed furthest |
Improvements deserve a caution. A project can add value, but the appraiser decides how much, and that is not certain. Debt payoff has a clear benefit: it can lower your monthly obligations and improve your debt ratios, which helps with a later conventional loan.
What Does the Lender Look For?
A lender reviews several things, and 80% LTV is only one of them.
- Ownership and occupancy: 12 months as your principal residence before the case number is assigned. HUD’s Handbook 4000.1 sets the cash-out rules, and the lender reviews proof such as employment records or utility bills.
- Payment history: the mortgages on the property must be paid on time over the prior twelve months. Any modification or forbearance in that window needs documents.
- Credit: FHA files with the wholesale lenders Lendmire works with start at a 580 decision score. Some lenders set a higher floor for cash-out.
- Ratios: the base pair is 31/43 (housing to total debt) with no compensating factors. Documented factors can reach 40/50 at the top tier. The automated finding governs most files.
- Appraisal: a new appraisal sets the value, and your loan must fit within 80% of it.
Strong equity, steady income and clean payment history make a later conventional exit more realistic. They matter now and later.
Where the General Rule Breaks
Some situations change the answer.
- Pre-June 3, 2013 loans. They follow the older cancellation rules, and a cash-out replaces them. Weigh this first.
- Very old FHA loans. Streamline and simple refinances of FHA loans endorsed on or before May 31, 2009 are exempt from the current premiums, per a 2023 HUD mortgagee letter. That is a reason not to refinance out of such a loan carelessly.
- Inherited homes. HUD waives the occupancy waiting period for inherited properties, as long as you have not treated the home as an investment since inheriting.
- Manufactured homes. The home must have been permanently installed on its site for more than 12 months before case number assignment.
- Second homes and rentals. Occupancy decides leverage. FHA cash-out is for the home you live in as your principal residence.
- A conventional loan today. Refinancing a conventional loan into an FHA cash-out is a different decision from FHA-to-FHA. No upfront credit exists, and you are adding FHA insurance you did not have.
- Hawaiian Home Lands. Section 247 loans carry no annual MIP.
What Does a Break-Even Check Look Like?
Compare what you save against what the exit costs. This is a method, not a prediction.
First, estimate the monthly drop when MIP ends. Second, add the closing costs of the new loan. Third, adjust for any change in the new loan’s interest cost, which can swing the result either way. Fourth, account for any lost upfront credit. Fifth, if the new loan carries PMI, subtract it from your savings.
Divide total costs by monthly savings. That tells you how many months before the exit pays for itself. If you may sell or move before then, the exit may not be worth it. A simple version leaves out the interest-cost change and the lost credit, which is where many comparisons mislead.
When Not to Rush the Exit
Some borrowers cannot exit soon, and that is acceptable. If your equity is thin, your credit is rebuilding, or the break-even stretches past the years you plan to stay, staying put can be the stronger plan. Keep paying on time, watch your equity, and revisit once a year. The eleven-year clock runs either way.
Common Mistakes
- Expecting extra principal payments to cancel FHA MIP.
- Assuming a streamline removes MIP. It lowers cost in some cases, but the premium continues.
- Treating “80% LTV” as approval. It is one gate among several.
- Ignoring the old loan’s case-number date.
- Taking more cash than the purpose needs.
- Comparing only the payment and skipping closing costs. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Key Terms Defined
MIP (mortgage insurance premium): the insurance FHA borrowers pay, made of a one-time upfront premium and a monthly annual premium.
PMI (private mortgage insurance): insurance on a conventional loan with a small down payment, which can be canceled as equity grows.
LTV (loan-to-value): the loan amount as a percentage of the home’s appraised value.
Case number: the identifier FHA assigns to each loan, which decides which insurance rules apply.
Cash-out refinance: a new loan that pays off your current mortgage and gives you cash from your equity.
Net tangible benefit: a measurable gain, such as a lower payment, that an FHA streamline must show.
Frequently Asked Questions
Can I cancel FHA MIP once I reach 20% equity?
Not on post-2013 FHA loans. The cancellation right at set equity levels belongs to conventional PMI under federal law. On an FHA loan, annual MIP runs for its set duration unless you refinance or pay off the loan.
Does a cash-out refinance restart my MIP clock?
Yes, in practice. The cash-out creates a new FHA loan with a new case number, so the insurance terms are set again from its start. If the new loan lands at or below 90% LTV on a thirty-year term, annual MIP should end after eleven years. Confirm the details with your loan officer. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Is “FHA PMI” the same as MIP?
No. People often say “FHA PMI,” but FHA mortgage insurance is MIP. PMI is the conventional version, and its cancellation follows different rules.
Can a conventional cash-out avoid mortgage insurance?
It may, depending on your equity, credit and income. Conventional loans at lower LTV may not need PMI at all. At higher leverage, you may trade MIP for PMI. Ask for both options side by side before you choose FHA.
Will my old upfront premium come back as cash?
No. A partial credit may apply toward the new loan’s upfront premium, but only when you refinance FHA to FHA, and the rules are subject to change. It is a credit, not a payout.
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. Program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
2. CFPB bulletin on PMI cancellation and termination
3. HUD Answers: MIP for loans with case numbers before June 3, 2013
4. HUD notice to homebuyers on upfront premium refunds
This article is part of Lendmire’s FHA Loan series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: Refinancing An FHA 203(k) Loan After The Renovation Is Done · FHA Simple Refinance Vs FHA Streamline: The Appraisal Makes The Difference · FHA Cash-out Refinance Credit Requirements: The Floor And The Overlays Above It
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.