The Quick Read: No. An upfront mortgage insurance refund exists only when the loan being paid off is itself an FHA loan. A conventional loan carries no FHA premium, so there is nothing to credit. The new FHA cash-out loan charges the full upfront premium, which is 1.75% of the base loan and is usually financed into the balance. Any refund of unused conventional PMI comes from the old servicer, not from HUD.
Why Is There No Refund When the Old Loan Was Conventional?
A refund needs a premium to refund. FHA’s upfront mortgage insurance premium (UFMIP) is paid to HUD on an FHA-insured loan. A conventional loan never paid it.
HUD’s FHA Homeowners Fact Sheet says that when an FHA loan is refinanced, the refund from the old premium may be applied toward the upfront premium on the new loan. For loans endorsed on or after December 8, 2004, no refund is due unless the homeowner refinanced into a new FHA-insured loan. None is due after the third year of insurance. HUD also notes that the refund rules depend on the financial status of the FHA insurance fund and are subject to change, so confirm current rules on your own file.
Read that language from the conventional side. The payoff is not an FHA loan, so no old premium exists. The new loan starts from zero credit.
Across the wholesale programs Lendmire places FHA files with, this is one of the most common surprises. Borrowers hear “FHA refunds your premium” and assume it travels with any refinance. It doesn’t. It is an FHA-to-FHA feature.
What Do You Pay Instead on the New FHA Cash-Out?
You pay the standard FHA structure. The upfront premium is 1.75% of the base loan amount. HUD Mortgagee Letter 2023-05 applies that figure to all mortgages, and the exceptions are narrow. They cover certain older FHA Streamline and Simple Refinances and Hawaiian Home Lands loans. A standard cash-out from a conventional loan is not on the list.
There is also an annual premium. Across the programs Lendmire works with, it falls between 0.15% and 0.75% of the balance, depending on loan term, loan amount and LTV. Duration matters as much as size:
- On a thirty-year loan above 90% LTV, the annual premium lasts for the loan term.
- At or below 90% LTV, it ends after eleven years. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
A cash-out is capped at 80% LTV on a home you have owned and lived in for 12 months before the case number. Most borrowers financing at that ceiling land in the lower-LTV bracket for annual premium duration. Subject to lender guidelines and full file review, your loan officer can confirm which bracket your file falls in.
The upfront premium is financed on top of the base loan. It raises your balance above the cash you receive. No credit offsets it, which is the key difference from an FHA-to-FHA refinance.
Quick Reference: When Does a Refund Credit Apply?
| Old loan | New loan | Upfront credit? |
|---|---|---|
| FHA (within HUD window) | FHA cash-out or Streamline | Possible partial credit |
| FHA | Conventional | No |
| Conventional | FHA cash-out | No |
| Any loan paid off by sale | None | No |
The conventional-to-FHA row is the one this article answers. The answer is no, in every version of that path.
Is the FHA Refund Ever Paid in Cash?
No. Even in the FHA-to-FHA case, the refund works as a credit toward the new loan’s upfront premium. It is not a check. HUD does describe a payment route outside a refinance credit, either a Treasury check or an application for premium refund, but that applies to narrow situations on the old FHA loan. It does not turn the credit into spendable cash on a new cash-out.
Two other limits come from HUD’s rules. No refund is due the homeowner when a claim is submitted to HUD. And selling or paying off without a new FHA loan gets no refund either.
Older loans carried longer windows. Loans closed before January 1, 2001 had no refund after year seven. Loans closed on or after that date and endorsed before December 8, 2004 had none after year five. Few borrowers hold those loans now, so the five-year rule you may have heard is mostly a relic.
Cash-Out Proceeds Are Not a Refund
Many searchers mix up two different things. A cash-out refinance lets you borrow against equity. That money is a loan. You repay it. A mortgage insurance refund would be a return of a premium you already paid.
On an FHA cash-out from conventional, you can receive proceeds, but you get no premium money back. If the question is “can I get money back on an FHA loan,” the honest answer is that equity can come out as proceeds, limited by the 80% LTV cap and the appraised value. Equity beyond the cap cannot be borrowed. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
What About Your Old Conventional PMI?
Here the refund question has a real answer, just not from FHA. If you paid conventional private mortgage insurance, the payoff ends it. Under the Homeowners Protection Act, servicers must return unearned premiums, as the Federal Reserve’s HPA supervisory manual explains. Any refund comes from your old servicer or insurer. Watch for it after payoff, and ask the old servicer if nothing arrives.
If you had no PMI at all, say because you had 20% or more equity, the FHA cash-out adds a mortgage insurance cost that did not exist before. That is the most important budget shift in this switch.
Conventional PMI is also temporary by design. The CFPB’s HPA examination procedures confirm that a borrower can request cancellation at 80% of original value, and servicers must terminate it automatically at 78%. FHA premiums follow the term-and-LTV rules above instead. Lendmire’s piece How to Plan Your Exit From MIP After an FHA Cash-Out covers what that path looks like.
When Does Moving From Conventional to FHA Cash-Out Make Sense?
It can make sense when the conventional path doesn’t fit your file. A borrower whose credit score is lower, whose debt ratios are higher, or whose recent credit history rules out a conventional cash-out may find FHA more reachable. The base ratio pair is 31/43 with no compensating factors, and documented factors can reach 40/50 at the top tier.
It may be the wrong move when you have strong credit and plenty of equity. A conventional cash-out can avoid the FHA premium structure entirely. You would trade FHA’s flexibility for a cost you may not need.
Run the comparison on the full cost picture, not the headline terms:
| Factor | FHA cash-out | Conventional cash-out |
|---|---|---|
| Upfront premium | 1.75% of base loan | None |
| Ongoing insurance | Annual premium | PMI, usually above 80% LTV |
| Insurance duration | By term and LTV | Cancels at 78-80% |
| Credit flexibility | Wider | Often stricter |
What Qualifies You for the FHA Cash-Out?
The FHA cash-out refinance program reaches 80% LTV on a home you have owned and occupied for 12 months before the case number. HUD cut the cash-out maximum to 80% under Mortgagee Letter 2019-11, which is reflected in Handbook 4000.1. Because HUD updates the Handbook, confirm the current version on hud.gov before relying on any single provision. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
What the lender weighs:
- Appraised value and the equity left after the 80% cap
- Ownership and occupancy history
- Mortgage payment history on the current loan
- Credit and income
- The new payment, closing costs and mortgage insurance together
Some lenders set stricter standards than HUD does. A lender-specific overlay may ask for more than the base rule, so the same file can read differently from lender to lender. Everything here is subject to lender guidelines and full file review, and none of it is a commitment to lend.
How Do You Confirm This on Your Own File?
Ask your loan officer these questions, and check the Loan Estimate and Closing Disclosure for each:
1. Is my current loan FHA or conventional?
2. If conventional, where does the upfront premium appear, and is it financed?
3. What is the base loan amount, and what is the balance after the financed premium?
4. Which annual premium bracket applies, and for how long?
5. Does my old servicer owe me an unearned PMI refund?
If any credit line appears on the closing documents where your payoff is conventional, ask what it represents. It should not be an FHA premium credit.
Key Terms Defined
Upfront mortgage insurance premium (UFMIP): A one-time FHA premium, 1.75% of the base loan, usually financed into the balance.
Annual mortgage insurance premium (MIP): A recurring FHA premium based on the balance, term, loan amount and LTV.
Base loan amount: The loan before the financed upfront premium is added.
Cash-out refinance: A new mortgage that pays off the old one and lets you borrow against equity.
PMI: Private mortgage insurance on a conventional loan, which can be cancelled as the balance falls.
Seasoning: The time you have owned, lived in, or paid on a home before a loan is reviewed.
Frequently Asked Questions
Can I get an MIP refund if I leave a conventional loan for an FHA cash-out?
No. There is no FHA premium on the old loan to refund. You pay the full 1.75% upfront premium on the new loan, typically financed into the balance.
Is the FHA upfront premium refund ever paid as cash?
Generally it works as a credit toward the new upfront premium on a new FHA loan, not as cash. HUD’s rules also bar a refund after the third year for loans endorsed on or after December 8, 2004, and on claims. Confirm current rules with your lender.
Does selling or paying off an FHA loan trigger a refund?
Not under HUD’s Fact Sheet. For post-2004 loans, a refund is tied to a new FHA-insured refinance and its time window. A sale or outright payoff without one does not qualify.
Will my old conventional PMI be refunded?
Possibly, in part. Under the Homeowners Protection Act, servicers must return unearned PMI premiums. That money comes from your old servicer or insurer, not from HUD or the new lender.
Can FHA mortgage insurance be removed later?
It depends on the loan. On a thirty-year loan above 90% LTV, the annual premium lasts for the term. At or below 90% LTV, it ends after eleven years. Refinancing out of FHA is another route, and the outcome depends on your equity and credit then. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
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.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. HUD FHA Homeowners Fact Sheet
2. HUD Mortgagee Letter 2023-05
3. Federal Reserve HPA background
4. CFPB HPA examination procedures
5. HUD Handbook 4000.1 transmittal
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: Should FHA Homeowners Use a Conventional Cash-Out Refinance for Debt? · Does an FHA Cash-Out Refund the Upfront Premium on the Old Loan? · Is an FHA Cash-Out Easier to Qualify for Than a Conventional Cash-Out?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- 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.