The Quick Read: Yes, you can take an FHA cash-out refinance while planning to leave mortgage insurance behind, if you meet the cash-out rules. But the cash-out does not get you out of mortgage insurance. It replaces your old FHA loan with a new FHA loan, and the new loan carries its own insurance schedule. Mortgage insurance ends for good only when the loan is paid off by a non-FHA loan, when the annual premium period runs out, or when you sell.
The rest of this page covers what that means for your timing, your equity, and your next move.
What Does an FHA Cash-Out Actually Do to Your Mortgage Insurance?
An FHA cash-out pays off your current loan and starts a new FHA loan. Mortgage insurance comes with the new loan. The old loan’s progress toward its insurance end date does not follow you.
Here is the plain version. FHA mortgage insurance, or MIP, has two parts. The upfront premium is 1.75% of the base loan, and most borrowers finance it into the balance. The annual premium is billed monthly. Across the wholesale programs Lendmire places FHA files with, the annual premium runs between 0.15% and 0.75% of the balance. The exact number depends on the term, the loan amount, and the loan-to-value ratio (LTV, the loan balance as a percentage of the home’s value).
Because the new loan is a fresh FHA loan, it gets a fresh upfront premium and a fresh annual schedule. On a 30-year loan at or below 90% LTV, the annual premium ends after eleven years. Above 90% LTV, it lasts the full term. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
A cash-out is capped at 80% LTV. That means a new cash-out loan starts at or below 90%, so its annual premium should run eleven years. That is how the rules fit together, and it is why the clock starts over. No agency page says “the clock restarts” in those words, so have your loan officer confirm the schedule on your specific file. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
The upshot: an FHA cash-out is a way to get cash. It is not a way to get out of MIP.
How Does MIP End on an FHA Loan?
MIP ends three ways: the annual period runs out, a non-FHA loan pays off the FHA loan, or the loan is sold or paid off. Equity growth alone does not cancel it on newer loans. That surprises many homeowners.
The length of the annual premium is set when the loan is made. HUD Mortgagee Letter 2013-04 ties it to the original LTV. If the original loan was at or below 90% LTV, the annual premium runs to the end of the term or eleven years, whichever comes first. If it was above 90%, it runs for the whole term. This applies to loans with case numbers assigned on or after June 3, 2013. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Older loans followed a different rule, with cancellation at 78% LTV. If your loan predates the 2013 change, the same letter’s tables show those older durations. Check which group you are in before you decide anything. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
| Your situation | What happens to MIP |
|---|---|
| Newer loan, original LTV 90% or less | Annual MIP ends after eleven years |
| Newer loan, original LTV above 90% | Annual MIP lasts the full term |
| FHA cash-out into a new FHA loan | New upfront premium, new annual schedule |
| Paid off by a non-FHA loan | FHA MIP ends with the old loan |
| Home sold | MIP ends at payoff |
Notice what is missing from that table. Home appreciation is not on it. Paying down principal faster is not on it either. Neither one shortens the annual premium period on a newer loan.
Why a Cash-Out Can Cost You a Near-Finished MIP Clock
The biggest risk is timing. If your old loan is close to the end of its eleven-year annual premium period, an FHA cash-out can cost you that finish line.
Picture a homeowner in year ten of a loan that started at 90% LTV or less. In about a year, the annual premium stops by itself. If that homeowner takes an FHA cash-out now, the old loan is paid off and a new eleven-year schedule begins. The premium that was about to disappear is back, on a larger balance. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
That is the case where waiting usually beats acting. It is also why “MIP exit” and “FHA cash-out” are close to opposite goals. One shrinks your insurance cost over time. The other resets it.
For a deeper look at planning around this, see Lendmire’s piece How to Plan Your Exit From MIP After an FHA Cash-Out.
When the FHA Cash-Out Still Makes Sense
Sometimes the cash is worth the reset. You need the money for a specific purpose, your equity is thin, and a conventional loan would not work yet.
Lendmire arranges the FHA cash-out refinance program for homeowners who fit its rules. Here is what the program looks for, as we see it across wholesale lenders:
- Ownership and occupancy. At least one borrower must have owned and lived in the home as a primary residence for 12 months before the case number is assigned.
- Leverage. The new loan, plus any other liens on the home, can reach 80% LTV at most.
- Payment history. The lender reviews your recent mortgage payments, and late payments matter. The lender confirms the exact standard against FHA’s guidelines.
- Credit and income. Debt-to-income ratios start at 31/43 (housing cost and total debt as a share of income) with no extra strengths on the file. Documented compensating factors can stretch that to 40/50 at the top credit tier. The automated underwriting finding governs most files.
- Appraisal. A full appraisal sets the value that the 80% ceiling applies to.
None of this guarantees approval or a cash amount. Every program figure is subject to lender guidelines and a full file review.
The 80% cap is lower than it used to be. HUD cut the FHA cash-out maximum to match the maximum used for conventional cash-out loans. If you read an older page that quotes a higher cap, it is out of date.
One more detail trips people up. The financed upfront premium, the closing costs, and the payoff all come out of that same 80% limit. A low appraisal shrinks your cash fast.
What Is the Conventional Route to Leaving MIP?
A conventional cash-out refinance can end FHA mortgage insurance, because a non-FHA loan pays off the FHA loan. But conventional loans have their own insurance, called private mortgage insurance (PMI). Whether you owe it depends on the new loan’s LTV and the lender’s guidelines.
Conventional cash-out on a one-unit primary home is also capped at 80%. That puts you at the edge of where PMI usually appears. If you take cash and land near that cap, you may trade one insurance for another. If you leave plenty of equity unused, you may avoid it.
PMI works under different rules than MIP. Under federal law, you can ask in writing to cancel PMI when your balance reaches 80% of the home’s original value. The servicer must end it automatically at 78%. According to the CFPB, you generally need current payments, no junior liens, and no decline in value. Those cancellation rights do not apply to FHA MIP, which follows FHA’s own schedule.
This is the real tradeoff. Conventional cash-out can end FHA insurance. It also pushes you into a new loan with its own credit, income, and equity tests.
FHA Cash-Out, Conventional Cash-Out, a Second Lien, or Waiting?
You have four realistic paths. Each does something different to your insurance and to the loan you already have.
| Path | Mortgage insurance | Your first mortgage | Best fit |
|---|---|---|---|
| FHA cash-out | New FHA premiums start | Replaced | Thin equity, need cash |
| Conventional cash-out | FHA MIP ends; PMI may apply | Replaced | Strong credit, solid equity |
| Home equity loan or HELOC | Old MIP continues | Stays in place | Want cash, keep current loan |
| Wait | Old MIP runs on schedule | Stays in place | MIP end date is close |
The second-lien route deserves a fair look. A home equity loan or line of credit sits behind your FHA loan, so your first mortgage and its MIP clock stay untouched. Lenders set their own rules for these products, and the second lien counts toward combined leverage. Compare it before you assume a cash-out is the only way to reach your equity.
Waiting is a real strategy too. If your annual premium is about to end, the wait can cost nothing.
Now or Later? A Simple Decision Framework
Start with your clock, then your equity, then your reason for needing cash. Here is how the logic usually runs.
- Your MIP end date is close. Wait if you can. A cash-out resets a clock that was nearly done. Cover the need with a second lien if cash cannot wait.
- Your MIP runs the full term. Your original LTV was above 90%, so no end date is coming. A move to conventional is the only way out. Check whether your equity and credit support it.
- You have plenty of equity and strong credit. A conventional cash-out may end FHA insurance and give you cash. Test the numbers on your own file.
- Your equity is thin or your credit is rebuilding. An FHA cash-out may be the only cash-out you can get. You accept new MIP in exchange.
- You want no cash at all. An FHA Streamline refinance keeps the insurance going and gives no cash. It does not help an MIP exit either.
Costs matter in that decision. Every refinance carries closing costs, and the CFPB’s cash-out research notes they can be substantial, including origination, appraisal, and title charges. Doing an FHA cash-out now and a conventional refinance later means paying those costs twice. Ask for a Loan Estimate on each path and compare the full costs side by side.
Three Short Scenarios
These are illustrative. They use percentages and plain words, not dollar figures. Your file will differ.
The mid-term homeowner. Say you started at 90% LTV or less and you are in year four of the eleven-year annual premium. You need cash for a project. An FHA cash-out resets the premium to a full new schedule. A home equity loan or a conventional cash-out may serve you better, depending on your equity and credit. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
The homeowner nearly done. Consider a homeowner in year ten who wants cash. The old premium ends soon. The cleanest move is to wait, or to use a second lien. An FHA cash-out here gives up the one thing the homeowner was waiting for.
The high-leverage starter. Run the picture on someone who bought at more than 90% LTV. Their annual premium lasts the whole term. Waiting does nothing. The question is whether growth in value and loan paydown now put them within reach of a conventional loan. If a conventional cash-out lands above the PMI line, the cash costs them a different insurance. If they keep the cash small, they may clear it. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Honestly, the third scenario is the genuine toss-up. The math depends on how much equity is left after the cash comes out, which is why the equity figure is the first number to pin down.
Common Mistakes Homeowners Make
Most of these come from old information.
- Assuming FHA cash-out reaches higher leverage. It is capped at 80% today.
- Assuming an FHA-to-FHA refinance ends MIP. It does not. The new FHA loan has its own premiums.
- Counting on equity to cancel MIP. On newer loans, the duration follows the original LTV, not later equity.
- Mixing up MIP and PMI. PMI has legal cancellation rights. FHA MIP follows FHA’s schedule.
- Treating the 80% cap as a promise. The lender still reviews occupancy, payment history, credit, income, and the appraisal.
- Counting only the premium. The new loan’s balance, term, and closing costs all change what you pay over time.
What to Ask a Loan Officer
Bring these questions to the first conversation:
1. When was my FHA case number assigned, and what was my original LTV?
2. When does my annual premium end if I do nothing?
3. If I take an FHA cash-out, what new premium schedule applies?
4. What would a conventional cash-out look like on my equity, and would PMI apply?
5. Does a second lien make more sense than replacing my first mortgage?
6. What are the total closing costs on each option, on a Loan Estimate?
Rules and guidelines change, so treat any figure here as a starting point to confirm against your own file.
Key Terms Defined
MIP (mortgage insurance premium): The insurance FHA loans carry, made up of an upfront premium and an annual premium billed monthly.
Upfront premium: A one-time charge of 1.75% of the base loan, usually financed into the balance.
LTV (loan-to-value): Your loan balance as a percentage of the home’s value.
Cash-out refinance: A new loan that pays off your current mortgage and gives you the leftover equity as cash.
PMI (private mortgage insurance): The insurance on conventional loans with small down payments, which carries legal cancellation rights.
Case number: The identifier FHA assigns to a loan file, which decides which rules apply to it.
Compensating factors: Documented strengths on a file, such as savings or strong payment history, that let a lender accept higher debt ratios.
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, so the loan terms, approval, and funding come from the wholesale lender that reviews your file.
Frequently Asked Questions
Does an FHA cash-out refinance remove my mortgage insurance?
No. It replaces your old FHA loan with a new FHA loan that carries a new upfront premium and a new annual premium schedule. Only a non-FHA payoff, the end of the annual premium period, or a sale or payoff of the loan ends FHA insurance.
Does the time I already paid MIP count toward the new loan?
Almost certainly not. The annual premium period is set by each loan’s original LTV, so a new loan starts its own clock. No agency page states it in those words, so confirm the schedule with your loan officer before you sign.
How much equity do I need to take FHA cash-out?
You need to stay at or under 80% LTV after the new loan, including any other liens. The financed upfront premium and closing costs come out of that same limit. A low appraisal reduces your available cash, and approval is never assured. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Can I use a home equity loan instead and keep my FHA loan?
Often yes, subject to the second-lien lender’s guidelines. Your first mortgage and its MIP clock stay in place. The second lien counts toward combined leverage, so compare the full costs before choosing.
Is FHA mortgage insurance the same as PMI?
No. PMI is for conventional loans, and federal law gives you rights to request cancellation at 80% of original value and automatic removal at 78%. FHA MIP follows its own schedule, set when the loan is made.
For your own numbers, request a scenario review with Lendmire.
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. HUD Mortgagee Letter 2013-04
2. HUD Archives: FHA cash-out maximum LTV announcement
3. CFPB: When can I remove private mortgage insurance (PMI) from my loan?
4. CFPB: Cash-out refinances and paydown behavior of non-mortgage debt balances
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: How to Plan Your Exit From MIP After an FHA Cash-Out · Can a Homeowner Consolidate Debt With an FHA Cash-Out Refinance? · Can You Get an FHA Cash-Out After a Conventional Denial?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.