Best Cash-Out Refinance Program to Remove Mortgage Insurance From an FHA Loan

The Quick Read: The program that ends FHA mortgage insurance and still hands you cash is a conventional cash-out refinance, provided enough equity remains after the new loan. An FHA cash-out refinance does the opposite: it replaces your loan with a new FHA loan that carries fresh insurance. Which path is best depends on your equity, credit, and how close your current loan is to dropping its insurance on its own.

Why Does an FHA Cash-Out Keep the Insurance?

An FHA cash-out refinance is a brand-new FHA loan. It pays off the old one, so the insurance does not disappear. It restarts. You pay a new upfront premium of 1.75% of the base loan, usually financed into the balance. You also pay a new annual premium that runs between 0.15% and 0.75% of the balance, depending on term, loan amount, and LTV.

LTV means loan-to-value: your loan balance as a percentage of the home’s appraised value. An FHA cash-out tops out at 80% LTV on a home you have owned and lived in for the 12 months before the case number is assigned. That 80% ceiling matters for insurance length. On a thirty-year loan at or below 90% LTV, the annual premium ends after eleven years. Above 90%, it lasts the full term. HUD spells out how long annual premiums last based on your original LTV. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.

So an FHA cash-out lands you in the eleven-year bucket. But it starts a new eleven-year clock. You traded an old clock for a new one. Not a removal.

Lendmire’s FHA cash-out refinance program page covers how that structure works if staying in FHA is the right call for you.

Which Refinance Programs Actually End FHA Mortgage Insurance?

Only a move out of FHA ends FHA mortgage insurance. Conventional loans may carry private mortgage insurance, but it is a different product with different cancellation rules. Veterans have a separate route. Here is how the main options compare.

The FHA Streamline deserves a warning. It refinances an existing FHA loan with no appraisal, a limited credit review, and a net tangible benefit requirement. It is useful for what it is. But it keeps the premium running and cannot pay you cash. If a mailer says a streamline “removes” insurance, read it twice.

Why Does FHA Insurance Stick Around?

Two things decide it: your original LTV and when the loan was made. Put down 10% or more at purchase, and the annual premium on a thirty-year loan generally ends after eleven years. Put down less, and it generally runs the whole term. Older loans follow older rules, so check your case-number date before assuming anything.

One more myth to clear up. FHA insurance does not fall off at 20% equity the way conventional PMI can. The CFPB explains that on conventional loans you can ask your servicer to cancel PMI once the balance is scheduled to reach 80% of the original value. The servicer must generally end it automatically at a scheduled 78%. Those rights cover PMI. They do not apply to FHA premiums.

How Does the Conventional Cash-Out Route Work, Step by Step?

The conventional route is a standard refinance with a few extra tests. Here is the sequence.

1. Set the goal. Decide whether you want cash, an end to the insurance, or both. Both is possible, but cash eats into the equity that makes the insurance go away.

2. Order the appraisal. The new loan is sized against appraised value, not your estimate or a listing price. The appraisal sets the cash ceiling.

3. Pull the payoff. The new loan must pay off the FHA balance first. Whatever room remains under the leverage limit is the most cash you can take.

4. Underwrite the file. The lender reviews credit, income, debts, and the property. Conventional lenders generally want stronger credit than FHA does. Fannie Mae’s Eligibility Matrix sets conventional leverage limits by occupancy and transaction type, and a cash-out limit sits below a no-cash refinance limit.

5. Compare mortgage insurance. If the new loan stays at or near 80% of value or below, conventional lenders generally do not require PMI. Above that, you may swap FHA insurance for PMI, which may not be the win you wanted.

6. Close. You sign, the new lender pays off the FHA loan, and you receive the cash balance. You will get a Loan Estimate and a Closing Disclosure along the way, so compare costs line by line.

What Does a Worked Example Look Like?

Run the numbers in percentages. Say your FHA balance equals about 60% of your home’s appraised value, and you want cash for a roof and a card payoff. Suppose the cash you need takes the new loan to a bit under 80% of value. A conventional lender may approve a loan with no mortgage insurance, subject to credit and full file review. You swap the FHA premium for nothing, and you get your cash.

Now change one piece. Suppose your balance is already near 78% of value, and the cash you want pushes the new loan above 80%. Now PMI likely enters the picture. You would be buying cash with an insurance swap. That is where a no-cash refinance, or a smaller cash amount, may fit better.

Those percentages are modeled assumptions, not market data. Your file will land somewhere else.

Here is the trade-off to weigh. Ending the annual premium lowers the monthly cost. A bigger balance from the cash raises it. Whichever side wins depends on your numbers, so compare the full monthly cost on the Loan Estimate, not the insurance line alone.

Which Program Fits Which Borrower?

The best program for your situation depends on equity, credit, military status, and what the cash is for. Here is a quick guide.

A broker’s real value shows up here. Across the wholesale programs Lendmire places files with, the same borrower can look strong in one program and borderline in another. Credit scoring, debt ratios, and leverage tolerance differ by program. FHA’s base ratio pair is 31/43 (housing and total debt as a percent of income). Documented compensating factors can stretch that toward 40/50, and the automated finding drives most files. Conventional programs weigh things differently, so the same file can go either way.

What If You Are Almost at the Equity Line?

An “almost there” file is common. The usual options:

• Take less cash. A smaller cash-out keeps the new loan under the line where PMI starts.
• Skip the cash. A rate-and-term conventional refinance is simpler. You remove the FHA premium without adding balance.
• Pay down first. Cash you put in before the appraisal can push you across the line.
• Wait for appreciation. If the 11-year drop-off is near, waiting may beat paying closing costs twice.
• Stay FHA and accept it. If the numbers do not work, keeping your current loan is a legitimate answer.

Where Does the General Rule Break?

A few edge cases change the answer.

• Original LTV above 90%. Annual premium generally runs the full term. Refinancing into conventional is often the main way out.
• Older FHA loans. Loans made under earlier rules follow different cancellation schedules. Check your case-number date first.
• Inherited or rented homes. FHA cash-out needs a principal residence you have owned and lived in for 12 months. A rental you inherited does not qualify until you have lived there that long.
• Second homes and rentals. Occupancy decides leverage. FHA cash-out is for the home you live in, and conventional programs set lower leverage limits for other occupancies.
• Manufactured homes. Conventional cash-out has special restrictions, and single-width homes can be ineligible. Check Fannie Mae’s manufactured housing matrix before planning around one.
• Hawaiian Home Lands. Section 247 loans carry no annual premium at all. HUD’s mortgagee letter on annual premium reductions notes the exception. It affects few readers, but it is a named one.
• Recent payment problems. FHA cash-out looks at your housing payment history over the prior 12 months. Late payments can shut the door, so verify before you apply.

How Do You Plan the Exit?

Think of insurance removal as a timeline decision, not a single event. Maybe you are three years from the eleven-year mark. Cash-out closing costs might outweigh the savings. Or maybe you are year two with a high original LTV and plenty of new equity. That calls for a closer look at leaving now.

Who Should Not Do This?

Skip the switch if any of these describe you.

• Your current loan’s insurance ends soon, and the closing costs would not pay back before then.
• Your equity is thin, and conventional PMI would simply replace FHA insurance.
• Your credit has slipped since you bought, which may push you out of conventional eligibility.
• You want cash mainly because a mailer said the insurance “goes away.” It does not on an FHA cash-out.

Honest bottom line: the best move is sometimes to leave the loan alone.

What Does the Lender Look For?

Lenders reviewing an FHA cash-out look at 12 months of ownership and occupancy as your principal residence, payment history, an appraisal supporting the 80% cap, and the debt ratios mentioned above. On the conventional side, expect a closer look at credit, reserves, and total debt. Have recent pay stubs, tax documents, your current mortgage statement, and homeowners insurance ready. Everything stays subject to lender guidelines and full file review.

Key Terms Defined

Mortgage insurance premium (MIP): The FHA insurance charge, with an upfront piece and a monthly annual piece, that protects the lender if you default.

Private mortgage insurance (PMI): The insurance on many conventional loans with less than 20% equity, which can be canceled under federal rules.

Cash-out refinance: A new loan larger than your payoff, where you receive the difference as cash.

LTV (loan-to-value): Your loan balance as a percentage of the home’s appraised value.

FHA Streamline: A refinance of an existing FHA loan with no appraisal and no cash out.

Case number: The ID HUD assigns when an FHA loan begins, which determines which insurance-duration rules apply.

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. Reach the team at 828-256-2183 or request a mortgage quote. Every program detail here is subject to lender guidelines and full file review, and nothing here is a commitment to lend.

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.

References

1. HUD FHA Answers: MIP duration for case numbers on/after June 3, 2013

2. CFPB: When Can I Remove Private Mortgage Insurance PMI from My Loan

3. Fannie Mae Eligibility Matrix

4. Fannie Mae Manufactured Housing Product Matrix

5. HUD mortgagee letter on annual premium reductions