The Quick Read: A cash-out refinance of an FHA loan is a brand-new loan. It gets its own annual mortgage insurance premium (MIP), and your old loan’s premium history does not carry over. How long you pay that new premium depends on the new loan’s term and its loan-to-value ratio (LTV, the loan as a percentage of the home’s appraised value). A cash-out is capped at 80% LTV, so most borrowers land in the shorter-duration tier. Subject to lender guidelines and full file review.
Key Takeaways
- The old loan is paid off. Its premium stops, and the new loan starts a fresh schedule.
- Three inputs set the annual premium: the new term, the new base loan amount and the LTV at origination.
- On a thirty-year loan, the premium lasts the full term above 90% LTV. At or below 90% it ends after eleven years.
- Extra equity you build later does not shorten the new loan’s premium period.
- Streamline refinances follow different rules from cash-out. Don’t mix the two up. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
What Annual MIP Is and How It Gets Billed
Annual MIP is insurance that protects the lender if an FHA loan goes bad. You pay it, not the lender. Despite the name, it is collected monthly. Across the FHA files I arrange through wholesale lenders, it shows up inside the monthly housing payment, next to taxes and homeowners insurance.
The premium is a percentage of your outstanding loan balance. Under the programs I work with, that annual percentage runs between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV. HUD’s own announcement of its premium schedule says it is calculated on the outstanding balance. It also confirms the premium counts in your debt-to-income ratio, the share of your income that goes to debts.
That last point matters for qualifying. On most files the base ratio pair is 31/43 (housing costs over total debts, both as a share of income). Documented compensating factors can stretch that to 40/50 at the top tier. The premium sits inside those numbers, so a bigger cash-out loan can squeeze your ratios twice: a larger balance and a larger premium.
There is also an upfront premium of 1.75% of the base loan, usually financed into the loan. It is separate from the annual premium and has its own rules, covered below.
What Happens to Your Old Loan’s MIP in a Cash-Out?
Your old premium ends when the old loan is paid off. The new loan starts its own schedule from day one. Nothing is inherited.
Here is the sequence on a typical file. The lender orders a full appraisal, since cash-out has no appraisal-free shortcut. The appraised value sets how much equity you can reach. The payoff statements for your existing mortgages are collected, and the old FHA loan is paid from the new loan’s proceeds. HUD’s servicing guidance says the lender keeps remitting premium on the old mortgage through the month it is paid in full. After that, the old loan’s premium history is finished.
Two things fall out of this.
First, having an FHA loan already gives you no premium advantage on the cash-out. You also don’t need an existing FHA loan to qualify for one. A conventional borrower can use the program too.
Second, the old loan’s age doesn’t matter for the new premium’s length. A loan you’ve paid on for seven years and a loan you opened last month both get priced as new on the cash-out.
You can read how the program works in detail on Lendmire’s FHA cash-out refinance program page. Here, the focus stays on the premium.
How the New Loan’s Annual MIP Gets Set
Three inputs choose the premium row on HUD’s schedule: the term, the base loan amount and the LTV at origination. HUD’s schedule covers FHA forward mortgages. It splits terms into longer than 15 years and 15 years or less. Within each, it splits by loan amount around a HUD breakpoint, then by LTV bands.
Your credit score does not set the premium. HUD’s table does. Credit still matters for approval, and the programs I place start at a 580 decision score.
Run through the inputs one at a time:
- Term. A thirty-year loan sits in the longer-term group. A fifteen-year loan is in the shorter group, with lower premium percentages.
- Base loan amount. Loans above HUD’s breakpoint carry a higher annual percentage than loans at or below it. Your base loan is the amount before the financed upfront premium.
- LTV at origination. Higher LTV bands pay more. Cash-out stops at 80%, so you stay in the lowest band for your term and amount.
HUD has since folded this schedule into its handbook. If a lender quotes a figure that differs from what you read online, the Loan Estimate is the document that governs your file. Third-party sites quote conflicting breakpoints, so don’t trust a blog’s number over the Loan Estimate.
Does the MIP Clock Reset?
Yes. The duration is set at origination, so a cash-out starts a fresh clock based on the new loan alone. HUD’s servicing tool shows duration turning on term and origination LTV for loans from the current rule set. For terms over 15 years, 90% LTV or less gives eleven years. Above 90%, you pay for the full loan term. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
| Your starting situation | Effect on the new premium | What to watch |
|---|---|---|
| Old loan had a full-term premium | New loan likely ends after eleven years | Confirm the term and 80% LTV tier |
| Old loan was nearly done paying MIP | Clock restarts at day one | Weigh the reset against the cash you need |
| Old loan predates HUD’s newer duration rules | Old rules drop away | Compare the old cancellation date |
| New loan above 90% LTV (not cash-out) | Premium lasts the full term | Only applies to purchase or rate-and-term |
The second row is the trade-off nobody mentions. If you are a few years from the end of your premium, a cash-out restarts a longer clock.
Where the General Rule Breaks
The rule that a cash-out is priced as a new loan holds up well. These cases bend around it.
Older FHA loans. Loans from before HUD’s duration change followed other cancellation rules, including a minimum premium period and an equity-based cancellation test. The servicing tool lists the cutoff. Refinancing into cash-out swaps those rules for the new loan’s origination-LTV test. HUD also states it won’t use a new appraised value to cancel premium on the existing loan, per its servicing guidance. Cancellation follows the original amortization schedule. That’s a common reason people refinance rather than wait. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Streamline exemptions. HUD’s schedule exempts certain Streamline and Simple Refinance loans that refinanced FHA loans from the pre-2009 period. That exemption concerns Streamlines only. Cash-out has no grandfathered premium. Anyone who tells you otherwise is mixing up two programs.
Hawaiian Home Lands loans. Section 247 loans don’t require annual MIP at all. This is rare, and it isn’t a typical consumer situation.
Upfront premium refunds. HUD allows a refund credit on the upfront premium when you refinance FHA to FHA within a limited window. Ask your loan officer to confirm in writing whether it applies to a cash-out refinance before you count on it.
Occupancy. FHA cash-out is for the home you live in. Second homes and investment properties are not eligible. Occupancy decides the leverage.
Liens that stay. The 80% cap is a combined limit. HUD’s cash-out letter measures it against adjusted value, so any second lien that remains uses up room. Many web pages still quote the older 85% cap. That number is out of date.
Cash-Out, Streamline or Keep the Loan You Have
If you already have an FHA loan, you have three paths. The premium outcomes differ.
| Option | Cash to you | Premium outcome | Fit |
|---|---|---|---|
| Keep your loan | None | Existing schedule continues | You don’t need cash |
| FHA Streamline | None | Premium continues; benefit test | You want a lower payment |
| FHA cash-out | Equity to 80% LTV | New schedule, new clock | You need real cash |
A Streamline refinances without an appraisal and with limited credit review. It must show a net tangible benefit. The cash-out requires a full appraisal, and the home must be owned and occupied for 12 months before the case number is assigned. The rate-and-term refinance with an appraisal reaches higher leverage, up to 97.75% on a primary residence occupied for the previous twelve months. But it doesn’t pay you cash.
A conventional cash-out refinance is another option. It can avoid mortgage insurance when LTV and credit allow, depending on the lender. I’d compare it before you commit.
What the Decision Looks Like in Practice
Picture a homeowner with an FHA loan who needs to fund a roof and a kitchen. The home has gained value. The appraisal comes in, and 80% of it clears the old payoff with room left over.
Now the decision. The new premium runs eleven years on a thirty-year loan at 80% LTV. The old loan’s premium stops. Cash in hand is the gain. A restarted clock and a larger balance are the cost. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Here is how I’d frame the questions, honestly weighing both sides:
1. How much cash do you actually need? A larger loan raises the balance, so the premium rises too. Take what the project needs.
2. How far along is your current premium? If it is nearly finished, the reset costs more.
3. Do your ratios survive? The new premium counts in debt-to-income, so run it before you apply.
4. Is a cheaper path available? A conventional cash-out, a home equity loan or a HELOC may fit better, depending on your equity and credit.
This one is a genuine toss-up for many people. The cash may be worth it, but the restarted clock is a real cost to weigh.
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.
Key Terms Defined
Annual MIP: the yearly mortgage insurance premium on an FHA loan, charged as a percentage of the balance and collected monthly.
Upfront MIP: a one-time premium of 1.75% of the base loan, usually financed into the loan.
LTV (loan-to-value): the loan amount divided by the home’s appraised value, shown as a percentage.
Base loan amount: the loan before the financed upfront premium is added.
Origination: the point at which the loan is made. Premium duration is tied to the LTV at this point, not to later equity.
Case number: the FHA identifier assigned to a loan file. It marks which rules apply.
Frequently Asked Questions
Do I need an existing FHA loan to get an FHA cash-out refinance?
No. The program works for homeowners whose current loan is conventional or FHA. An existing FHA loan gives no premium advantage on a cash-out, though.
Does my old loan’s annual MIP carry over to the new loan?
No. The old premium ends at payoff, and the new loan sets its own premium and duration from its term, amount and origination LTV. Your payment history on the old loan doesn’t shorten the new schedule.
How long will I pay annual MIP on a cash-out?
On a thirty-year loan at or below 90% LTV, eleven years. Above 90% LTV, the full term. Because the cash-out cap is 80%, most borrowers fall in the eleven-year group, subject to lender guidelines and full file review.
Will I get a refund of my old upfront premium?
It depends. HUD allows a credit when you refinance FHA to FHA within a limited window. Whether that credit applies to a cash-out refinance depends on the specific loan and lender, so ask your loan officer to confirm it in writing. It is a credit, not cash, and it never touches annual MIP.
Can I cancel the premium early once I build equity?
Not on a loan under the current rules. Duration is fixed at origination. The common route out is refinancing into a conventional loan when your equity and credit support it.
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
1. HUD announcement of annual premium reductions
2. HUD guidance on premium remittance and cancellation
3. HUD premium schedule letter
4. HUD servicing tool: final MIP date
5. HUD letter on the cash-out LTV cap
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: Can You Refinance Out of FHA With a Conventional Cash-Out Refinance? · How Much the Annual MIP Adds to an FHA Cash-Out Payment Over Time · Texas Homestead Rules for an FHA Cash-Out Refinance
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.