The Quick Read: On an FHA cash-out refinance, the condo itself does not change how long mortgage insurance lasts or what it costs. The new loan’s term and loan-to-value ratio (LTV, the loan as a share of the home’s value) set the schedule. Because cash-out stops at 80% LTV, the annual premium typically runs eleven years. The upfront premium is 1.75% of the base loan. What the condo does change is approval: the building or unit has to pass FHA’s condo review before any cash comes out.
Key Takeaways
- Upfront premium: 1.75% of the base loan, usually financed into the balance.
- Annual premium: a percentage of the balance, collected monthly. The percentage depends on term, loan amount and LTV, within a program range of 0.15% to 0.75%.
- Duration: a cash-out is a brand-new FHA loan. At 80% LTV or below on a thirty-year term, the annual premium ends after eleven years.
- The condo gate: project approval or single-unit approval decides whether you can do the loan. It does not change the premium.
What Is MIP, and What Are You Actually Paying?
MIP is mortgage insurance premium. It protects the lender if the loan goes bad, and it comes in two parts.
The first part is the upfront premium. On the FHA cash-out refinance program, it is 1.75% of the base loan. The base loan is the amount you borrow before the premium is added. HUD’s FHA Resource Center confirms the same 1.75% applies to purchase and refinance loans, and that it is collected at closing. A cash-out does not get its own higher upfront figure. A common myth says it does.
The second part is the annual premium. Despite the name, you do not pay it once a year. It is spread into monthly installments and added to your housing payment. Across the wholesale programs Lendmire places FHA files with, that annual premium lands between 0.15% and 0.75% of the balance. Where you land depends on term, loan amount and LTV.
You can pay the upfront premium in cash or finance it into the loan. It is one or the other. Splitting it is not an option. Most borrowers finance it, which raises the balance a little and means interest accrues on the premium too.
How Long Does MIP Last on a Cash-Out?
The annual premium on a cash-out typically lasts eleven years on a standard thirty-year term. The reason is arithmetic. Duration depends on LTV, and cash-out is capped at 80% LTV. That cap keeps every cash-out below the 90% line where the premium would last for the whole term.
HUD Mortgagee Letter 2023-05 sets the schedule. Here is how it reads for a standard-term loan:
| Loan situation | Annual premium runs | Possible on a cash-out? |
|---|---|---|
| Term over 15 years, LTV 90% or less | 11 years | Yes |
| Term over 15 years, LTV above 90% | Full loan term | No, cap is 80% |
| Term 15 years or less, LTV 90% or less | 11 years | Yes |
| Term 15 years or less, LTV above 90% | Full loan term | No, cap is 80% |
Two things follow from this.
A cash-out starts a fresh clock. You are not extending your old loan. You are replacing it with a new FHA loan, and the eleven years count from the new loan’s start. Time you already spent paying MIP on the old loan does not carry over. (Plenty of borrowers assume it does.)
Paying down the balance does not end it early. Some web pages say MIP drops off at 78% or 80% LTV. That was HUD’s older cancellation rule, and it covers only loans from before the reform. On a current loan, the eleven-year minimum stands even if your LTV falls faster than expected. For more on how the schedule shifts with term and LTV, see Lendmire’s piece FHA Cash-Out Annual MIP Duration by LTV, Term and Loan Tier. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Does a Condo Change the MIP?
No. HUD’s schedule has no property-type column. A condo, a single-family home and a duplex all follow the same term-and-LTV logic. A second home or investment condo cannot use this loan at all, since cash-out requires a principal residence you have owned and lived in for 12 months before the case number is assigned.
Here is where the condo does matter:
- Approval. FHA insures a unit only if the building is on its approved list or the unit qualifies for single-unit approval.
- Eligibility. A weak project can block a loan even when your own file is strong.
- Ongoing costs. HOA dues sit outside the mortgage insurance but add to your monthly housing cost, and that counts in your ratios.
So the premium math is identical. The gatekeeping is stricter.
How Does the Condo Approval Gate Work?
A cash-out on a condo needs the project approved first, or the unit must qualify for single-unit approval. Check this before you spend money on an appraisal. A building that fails the review stops the loan regardless of your equity.
Start with the project’s status. HUD publishes it through its FHA Connection condo list. Statuses include Approved, Expired and Withdrawn. Per HUD, an FHA application cannot be processed for a unit in a withdrawn project. An expired approval can stall things too. Approvals last only a limited period, so a building that was approved when you bought may have lapsed.
If the building is not on the list, single-unit approval may still work. The National Association of Realtors summarizes the requirements HUD finalized in its condo rule. They include a minimum number of units, a cap on how much of the building is FHA-insured, a minimum owner-occupancy share, and a limit on commercial space. HUD can allow lower owner-occupancy in some older, well-performing projects. Thresholds in these rules get updated, so the lender confirms them against current HUD guidance. The unit also needs a project questionnaire completed by the HOA or management company. Slow HOA paperwork is a frequent snag.
Here is the practical order of operations:
1. Confirm the building’s status on HUD’s list.
2. If it is not listed or has expired, ask whether single-unit approval is available.
3. Request the HOA documents early.
4. Only then move on to appraisal and underwriting.
How the Loan Is Underwritten, Step by Step
On a cash-out, the lender reviews these items in roughly this order:
1. Occupancy. The condo must be your principal residence. You must have owned and lived in it for 12 months before the case number is assigned.
2. Equity. The loan reaches up to 80% LTV. The test is run on the base loan, and the financed upfront premium rides on top of it. The final note amount can therefore end up a bit above 80% of value, subject to lender guidelines.
3. Payment history. Lenders review your recent mortgage payment record on the current loan. Recent late payments can cause problems.
4. Ratios. The base pair is 31/43, meaning housing costs are 31% of income and total debt is 43%. Documented compensating factors can stretch the top tier to 40/50. An automated underwriting finding governs most files.
5. Appraisal. The condo gets valued, which sets the LTV ceiling.
6. Condo review. The project or unit approval described above has to clear.
Condo HOA dues count toward your housing ratio. A high-dues building can push you off the base ratios even if the premium is modest. The lender’s HUD Handbook 4000.1 review controls the details, and individual lenders can add stricter overlays. Everything here is subject to lender guidelines and full file review, and nothing is a commitment to lend.
What Does the Total Cost Look Like?
Think of the cost as three layers. No dollar figures here, because they depend on your numbers.
Layer one: the upfront premium. Say your condo is worth 100 units of value and you borrow the full 80%. The upfront premium is 1.75% of that base loan, which equals 1.4% of the home’s value. If you finance it, your balance rises by that amount.
Layer two: the annual premium. It is a percentage of the balance, split into twelve monthly payments. Since the balance shrinks as you pay down, the premium dollars drift lower over time. A larger cash-out raises both the upfront premium and the annual one, because both scale with the amount borrowed. Larger base loans can also land in a higher premium tier.
Layer three: interest on the financed premium. The financed upfront premium becomes part of the loan, so you pay interest on it for as long as you hold the loan.
Added together, eleven years of annual premium plus the financed upfront piece is the true cost. Judge a cash-out by that total, not by the cash you take out. Your Loan Estimate lays out the premium lines for your actual file. Compare them against your other options before you commit.
Where the General Rule Breaks
A handful of situations break the standard picture:
- Not on the approved list. Single-unit approval may rescue the loan. Lenders differ on how deep they go with it.
- Approval expired. A lapsed building can halt a cash-out. Check the list’s status before you apply.
- Older FHA loan with pre-reform terms. If you hold an FHA loan from before HUD’s cancellation reform, your current MIP may end on a different schedule. A cash-out replaces it with a new loan and a new schedule. You could be trading a shorter remaining premium for a fresh eleven years. That is worth a hard look before you proceed.
- Streamline instead of cash-out. An FHA Streamline refinances an existing FHA loan with no appraisal and a limited credit review. It requires a net tangible benefit, and the premium continues. It does not put cash in your hands, so it cannot replace a cash-out if you need the equity.
- Programs with different MIP rules. Reverse mortgages and a few other HUD programs follow different rules. They fall outside this article.
This is a genuine toss-up for some borrowers. The cash-out gives you access to equity, but it also locks in eleven more years of premium.
Stay the Course or Exit Later?
A cash-out resets the premium clock. Whether that is worth it depends on how long you plan to keep the loan and what the equity is for.
| Factor | Take the FHA cash-out | Keep current loan, skip cash-out |
|---|---|---|
| Access to equity | Yes, to 80% LTV | None |
| Premium clock | Resets on new loan | Stays on current schedule |
| Upfront premium | 1.75% of base loan | None |
| Best fit | A real need for cash | No cash need, MIP near its end |
Mortgage insurance is a real cost, but not the only one. Borrowers often take the cash to pay off higher-cost debt or fund repairs that protect the condo’s value. Those goals can justify the premium. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Key Terms Defined
MIP (mortgage insurance premium): the insurance cost on an FHA loan, paid as an upfront charge and as monthly installments.
Upfront premium: the one-time charge of 1.75% of the base loan, financed or paid in cash.
Base loan: the loan amount before the financed upfront premium is added.
LTV (loan-to-value): your loan balance divided by the home’s appraised value.
Single-unit approval: FHA’s path for insuring a loan on one condo unit when the building is not on the approved list.
Cash-out refinance: a new loan that pays off your old one and gives you some of your equity in cash.
Frequently Asked Questions
Does FHA mortgage insurance cost more on a condo than on a house?
No. The premium schedule does not differ by property type. Condo costs show up elsewhere, mainly in HOA dues and in the project approval requirements.
Can I cancel the annual premium early by paying my balance down?
Not on a current cash-out loan. At 80% LTV or below, the annual premium runs eleven years on a standard thirty-year term. Paying down the balance lowers the dollars you owe each month but does not shorten the period. Older loans under pre-reform rules followed a different cancellation rule. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Does the old MIP I paid get refunded on a cash-out?
Not as cash. A refund credit toward the new upfront premium applies only when you refinance one FHA loan into another within a limited window. It is never paid out to you. Ask your loan officer how it applies to your file.
What if my condo building is not FHA-approved?
Single-unit approval may still be possible if the building meets requirements on owner-occupancy, FHA concentration and commercial space. If neither route works, an FHA cash-out is off the table for that unit, and you would look at other programs.
Does a bigger cash-out raise my MIP?
Yes. Both premiums are percentages of the loan, so a larger base loan means a larger upfront premium and a larger annual premium. A bigger loan can also land you in a higher premium tier.
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. Start with the FHA cash-out refinance program page to see how Lendmire arranges these loans through its wholesale lenders. Ask for a Loan Estimate so you can see the premium lines side by side before you decide. Remember that approval for your building comes before the numbers matter.
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.
For the program’s current guidelines, see FHA loan programs.
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References
1. HUD FHA Resource Center: FHA mortgage insurance premium structure
2. HUD Mortgagee Letter 2023-05
3. HUD FHA Connection: condo project status field descriptions
4. NAR: FHA Condominium Rule Assessment
5. HUD Handbook 4000.1 on HUDClips
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 End Mortgage Insurance After an FHA Cash-Out on a Condo · FHA Cash-Out Appraisal Rules for a Condo Unit · Can an FHA Cash-Out on a 2-4 Unit Primary Home Drop MIP?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.