The Quick Read: The answer depends on the program, and on a conventional loan it is usually nothing. The conventional cash-out cap sits at 80% of your home’s value, which is the point where mortgage insurance would otherwise begin. FHA is different: it adds an upfront premium on top of the base loan, plus a monthly premium. VA adds no monthly insurance, but its funding fee has to fit under the VA ceiling. Every figure here is subject to lender guidelines and full file review, and nothing is a commitment to lend.
What Does “Above the Cap” Mean?
“The cap” is the highest loan-to-value (LTV) ratio a program allows on a cash-out refinance. LTV is the new loan divided by your home’s appraised value. A cap of 80% means the new loan cannot exceed 80% of that value, so you keep at least 20% as equity.
Most people hear “cap” and think “loan limit.” Those are two different ceilings:
- The LTV cap limits the loan as a share of value.
- The loan limit limits the loan in dollars. It varies by county and program, and this article does not quote it.
Either ceiling can be the one that binds. A home with huge equity can hit the loan limit first. A home with modest equity hits the LTV cap first.
Here is the part most explainers skip. On a true cash-out refinance, the cap is built so that the loan lands at or below the mortgage-insurance line. Programs that go past it work differently, and each one handles the extra cost in its own way. Lendmire’s cash-out refinance programs sit inside that structure, so the rest of this piece walks through it program by program.
Key Terms Defined
Base loan: The loan amount before any financed premium or fee is added.
Loan-to-value (LTV): The loan balance divided by the home’s appraised value, shown as a percentage.
Private mortgage insurance (PMI): Insurance on a conventional loan that protects the lender when your LTV is above 80%.
FHA mortgage insurance premium (MIP): FHA’s own insurance. It has an upfront piece and a monthly piece.
Funding fee: The VA’s one-time charge on a VA loan. It replaces monthly mortgage insurance.
Limited cash-out refinance: A refinance that pays off your current loan and costs, with only small cash back. It is also called a rate-and-term refinance.
Seasoning: The waiting period before a loan or ownership counts toward a new refinance.
How Is a Cash-Out Loan Sized, Step by Step?
Every cash-out refinance follows the same arithmetic. Only the cap and the insurance rules change.
1. The appraisal sets the denominator. The lender orders an appraisal. The appraised value is the number every cap gets applied to. FHA works from an “adjusted value” and VA from a VA-determined reasonable value, but the idea is the same.
2. The cap sets the maximum loan. Multiply value by the program’s cap. That is the most the new loan can be.
3. The loan pays off what you owe first. The new loan pays your current first mortgage and any closing costs you roll in.
4. What is left is your cash. Cash out equals the maximum loan minus the payoff and the financed costs. Every financed cost shrinks your cash dollar for dollar.
5. The file gets underwritten. The lender reviews credit, debt-to-income ratio and documents. The automated finding governs most files.
Seasoning rules apply before you get that far. For conventional cash-out, the first mortgage being paid off must be at least 12 months old, counted from note date to note date. At least one borrower must also have been on title for six months. Narrow exceptions exist, including delayed financing, inheritance and legal awards.
Mortgage Insurance a Cash-Out Refinance Adds, Program by Program
Conventional: The Extra Insurance Is Usually Zero
The conventional cash-out cap is 80% LTV on a one-unit primary residence. The Fannie Mae Eligibility Matrix lists it. Freddie Mac’s Guide Section 4203.1 sets the same figure for one-unit primary homes. Every figure here varies by lender and program: guidelines, property type, leverage, and credit profile all apply.
PMI starts above 80%. A loan capped at 80% never crosses that line. So the insurance a conventional cash-out adds above the cap is nothing, because the loan is not allowed above the cap.
Two-to-four-unit primary residences, second homes and investment property sit at 75%. They stay under the line too.
The “cash-out always means PMI” idea is a mix-up. PMI shows up on conventional refinances above 80% only when the loan is a limited cash-out, also called rate-and-term. That product allows up to 95% LTV on a one-unit primary residence. It reaches 97% where the existing loan is agency-owned and the first-time-buyer program allows. It pays off the current loan and costs and gives back only incidental cash. Mortgage insurance applies above 80%. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Whether any other lender charge applies to a cash-out is a pricing question. That belongs on your Loan Estimate, not in the agency guides.
FHA: The Premium Stacks on Top
FHA is the program where a cash-out really does add insurance. HUD Mortgagee Letter 2019-11 brought the FHA cash-out ceiling down to the same level as the conventional cap. It had been higher before. The letter says the change protects the FHA insurance fund. If you hear “FHA goes to 85%,” that is the old rule.
Here is how the insurance stacks:
- The base loan is sized at the cap.
- The upfront premium is a percentage of that base loan. Most borrowers finance it instead of paying cash.
- The financed premium lifts the note. The final loan balance lands a little above the cap, as a share of value.
- A monthly premium is billed on top of that, for the life of the schedule. HUD Mortgagee Letter 2023-05 lowered this annual premium for new FHA loans. It left the upfront premium alone.
So with FHA, you sit “above the cap” by design. The extra is the financed upfront premium plus the monthly premium. The cash you take is not charged separately. The premium applies to the whole loan, and the cash simply makes the loan bigger.
One more catch. A new FHA loan starts a new premium schedule. If you already pay FHA premiums, compare the total premium cost before and after you refinance. The monthly amount depends on term, loan size and LTV, and HUD sets it in its handbook tables. Ask the loan officer for the current figure for your file.
VA: No Monthly Insurance, but a Fee Inside the Ceiling
VA loans carry no monthly mortgage insurance. The VA instead charges a one-time funding fee, unless you are exempt. Exempt groups include veterans receiving VA disability compensation.
The VA cash-out ceiling is far higher than the conventional cap, up to the full value of the home. The funding fee has to fit under that ceiling. When you are already near the top, the fee comes out of your cash instead of raising the balance. The cash you walk away with shrinks.
Check the current VA figures on VA.gov before you decide. They are not repeated here.
Side by Side: How Each Program Treats the Cap
| Program | Cap on cash-out | Insurance above the cap | Exit path |
|---|---|---|---|
| Conventional | 80% LTV (1-unit primary) | None; loan stays at or under | n/a at 80% or less |
| FHA | Same level as conventional | Financed upfront + monthly premium | Follows FHA rules |
| VA | Up to full value | No monthly; funding fee inside ceiling | No monthly to remove |
| Limited cash-out | 95% (97% on some files) | PMI above 80% | Cancels at 80%, ends at 78% |
Where the General Rule Breaks
Several edge cases bend the simple “insurance is zero on conventional” answer. Know these before you assume.
The no-MI lane above 80%. Across the wholesale programs Lendmire places files with, one lane reaches 89.99% LTV with no mortgage insurance. It requires a 680 score and a 50% ratio ceiling. It is limited to a thirty-year fixed, a primary residence, a conforming balance and its own six months of seasoning. It is subject to lender guidelines and not available on every file. Lendmire’s piece Can a Conventional Cash-Out Go Above the Cap Without Mortgage Insurance? covers that structure in detail.
Occupancy. A second home or rental caps at 75% on cash-out. Occupancy decides the leverage, so the insurance question does not come up there.
Streamlines are not cash-out. The FHA Streamline is for an existing FHA loan. It has no appraisal, a limited credit review and a net tangible benefit test. The VA IRRRL is for an existing VA loan. It carries a 0.5% funding fee unless you are exempt, no VA appraisal, a net tangible benefit test, and seasoning of the later of 210 days and six payments. Neither one hands you equity as cash. If you want cash, the file becomes a cash-out. That means a full appraisal and the cash-out cap.
Jumbo. Above the conforming limit, the jumbo lanes take over. Across Lendmire’s wholesale programs these start at a 660 score, reach 90% leverage and go up to $5,000,000, with a 50% ratio ceiling on the fixed lanes. The lender sets its own limits there, not Fannie Mae or Freddie Mac. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Manufactured homes. Fannie Mae publishes separate limits for these properties, and the cash-out cap for some of them is lower than for site-built homes. Ask your loan officer to check the product matrix for your specific home.
Special FHA loans. Hawaiian Home Lands and Indian Lands loans get different premium treatment under HUD’s letters.
Texas. A cash-out on a Texas homestead is capped by the state constitution at the agency figure. Lendmire’s wholesale no-MI lane is not written there.
How Long Does the Added Insurance Last?
The exit path is where programs part ways.
PMI on a conventional loan can be cancelled on your request at 80% of the original value. The Consumer Financial Protection Bureau lists the conditions: ask in writing, have a good payment history, certify there are no junior liens, and show the value has not declined. Under the Homeowners Protection Act, the servicer must end PMI automatically at 78%. Loans designated “high risk” fall under a different final-termination rule.
Two myths here. PMI does not cancel on its own the moment you reach 20% equity. And FHA premiums are not governed by those same PMI rules. Check the schedule for your FHA loan. VA has no monthly insurance to remove.
What the Decision Looks Like in Practice
Picture a homeowner on a one-unit primary residence with a lot of equity, who wants cash for a renovation. The decision has four steps.
1. Find your equity line. Take 80% of the appraised value. Subtract your payoff and costs. That is your ceiling on cash.
2. Ask what you really need. Taking less cash keeps the balance lower. It also keeps FHA’s financed premium smaller, since the premium scales with the base loan.
3. Check what you already have. If your current loan is government-backed, a streamline might lower your cost. It will not give you cash. If it is conventional, the 80% cap already keeps PMI off the new loan.
4. Compare the full Loan Estimate. Look at the balance, the insurance lines and the total cost over how long you plan to keep the loan.
Mistakes show up in three places:
- Assuming the cash is charged its own premium. It is not.
- Forgetting that an FHA financed premium raises the balance.
- Expecting a streamline to pull cash.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Your Next Step
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. Lendmire is a mortgage broker. It arranges loans through wholesale lenders, subject to lender guidelines and full file review.
Frequently Asked Questions
Is mortgage insurance charged only on the cash I take out?
No. Insurance applies to the whole new loan, not just the cash portion. The cash adds insurance only by making the balance bigger. On FHA, the premium follows the base loan. On a conventional cash-out at or under 80%, there is no PMI at all.
Does a conventional cash-out refinance require PMI?
Not at the cap. Conventional cash-out tops out at 80% LTV on a one-unit primary residence, and PMI starts above 80%. PMI shows up on limited cash-out loans that go above 80%, and it can be cancelled later under the Homeowners Protection Act rules.
Can I finance the FHA upfront premium?
Yes, most borrowers do. Financing it adds it to the balance, so your final loan lands a little above the cap as a percentage of value. It also makes the monthly payment a bit larger. Your Loan Estimate shows the exact lines.
Does refinancing to conventional get rid of FHA insurance?
It can, in some cases. If your new conventional loan lands at or under 80% LTV, no PMI is needed. You give up the FHA premium schedule, but you also give up FHA’s looser credit rules. Compare the total cost on both sides first. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Does the VA charge mortgage insurance on a cash-out?
There is no monthly mortgage insurance on a VA loan. There is a one-time funding fee unless you are exempt. When the loan is near the VA ceiling, the fee reduces your cash instead of raising your balance. Confirm current VA figures with a lender.
For your own numbers, request a scenario 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. Fannie Mae Eligibility Matrix
2. Freddie Mac Guide Section 4203.1
3. HUD Mortgagee Letter 2019-11
4. HUD Mortgagee Letter 2023-05
5. CFPB: When can I remove PMI from my loan?
This article is part of Lendmire’s Refinance series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: How Much Down Payment a Cash-Out Refinance Funds Over a Low First Mortgage · How Much Cash a Cash-Out Should Release on a Mortgage Worth Keeping · Cash-Out Refinance Mortgage Insurance Rules With a Low First Mortgage
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.