The Quick Read: On a standard conventional cash-out refinance, you avoid PMI by keeping the entire new loan at or below the cash-out leverage cap, which is 80% of appraised value on a one-unit primary residence. The cap, not a separate PMI decision, does the work. You cannot borrow above it and then decline mortgage insurance on an agency loan. The one exception sits outside the agency box: a wholesale no-mortgage-insurance lane that reaches 89.99% for qualifying primary-residence files.
Key takeaways
- The 80% cap applies to the whole new loan, not to 80% of your equity.
- Every dollar of closing costs and payoffs financed into the loan counts against the cap.
- A limited cash-out (rate-and-term) refinance can go higher than 80%, but mortgage insurance comes with it.
- Seasoning, occupancy and appraisal cushion decide whether the plan works.
Cash-out refinance estimate
The starting figures are an example value with a balance and a cash request in proportion. Replace them with yours.
Editable benchmark: 7.18% as of November 5, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the agency cap on a one-unit principal residence, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a cash-out refinance quote; a cash-out loan is priced by the lender at lock. The cash available is the loan the program cap allows less the balances paid off, before closing costs, which are not included. The HELOC line is the program’s combined loan-to-value ceiling applied to the same value and balance. Taxes and insurance are editable estimates. Licensed in sixteen states for consumer mortgages.
What Does PMI Have to Do With a Cash-Out Refinance?
PMI is insurance that protects the lender, not you. Agency rules tie it to leverage. Fannie Mae’s Selling Guide says a loan is eligible with an LTV of 80% or less, and that mortgage insurance is needed on the part above 80%. Freddie Mac’s rules work the same way. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Here is why the cash-out case is different from a purchase. On a purchase, you choose your down payment, so you choose whether PMI appears. On an agency cash-out, the lender caps the loan at the level where PMI would not apply. Those two limits meet at the same number. Staying under the cap means no mortgage insurance line in the Projected Payments section of your Loan Estimate.
Across the wholesale programs Lendmire places files with, mortgage insurance is required above 80% LTV on the agency path, apart from the one no-MI cash-out lane covered below. That is the whole logic. Everything else here is about how to land under the line and what to do if you cannot. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
How the Loan Is Sized, Step by Step
Think of it as a short sequence.
1. The appraisal sets the denominator. LTV is the new loan amount divided by the appraised value. A lower appraisal shrinks your maximum loan. A higher one expands it.
2. Multiply value by the cap. On a one-unit primary residence, the cash-out cap is 80%. Freddie Mac’s Guide §4203.1 sets the maximums at 80% for a one-unit primary, and 75% for two- to four-unit primaries and second homes. Investment property is also held to 75% under Lendmire’s program figures, so occupancy sets the leverage.
3. Subtract what must be paid first. Your existing first mortgage payoff, any liens that must be cleared, and any closing costs you choose to finance all come out of that maximum before cash reaches you.
4. What remains is your cash. Nothing more. If the payoff and costs already use most of the 80%, your cash is small.
5. The final LTV is tested. At or below the cap, no mortgage insurance is placed. Above it, the file is no longer a standard agency cash-out.
A simple scenario, in percentages only: say your home has a first mortgage balance equal to about 55% of its appraised value. Roughly 25% of value is the theoretical ceiling on cash and costs combined. Financing closing costs trims that figure further. If the appraisal comes in a few percent lower than you hoped, your usable cash drops by more than a few percent, because the loan is capped as a share of a smaller number.
Now flip it. Say your balance is already near 75% of value and you want a large amount of cash. There is almost no room under 80%. The honest answer is that a standard agency cash-out cannot deliver that amount, and paying for insurance does not change the cap, so the amount of cash you can take stays small.
Which Clocks Have to Run First?
Two seasoning tests apply, and people confuse them. Under Fannie Mae’s cash-out rules, the first mortgage you are paying off must be at least 12 months old, measured note date to note date. Separately, program guidelines also look for at least one borrower to have been on title for six months. Exceptions exist for delayed financing (cash buyers), inheritance and legal awards.
That 12-month clock catches people who refinanced recently. If your current loan is younger than a year, a conventional cash-out may simply be unavailable yet, and no amount of equity fixes that. Waiting is sometimes a more affordable answer.
Occupancy matters too. Cash-outs are written on primary residences, second homes and investment properties, and occupancy sets the leverage. For this article’s purposes, the home you live in gets the most room.
What Is the Difference Between Cash-Out and Rate-and-Term?
This is where most “avoid PMI” confusion starts. A limited cash-out, also called rate-and-term, pays off your existing first mortgage, closing costs and a purchase-money second lien, with only incidental cash back. Fannie Mae’s figure is the lesser of 2% of the new loan amount or $2,000. Freddie Mac’s is the greater of 1% of the new loan amount or $2,000.
Because you are not pulling meaningful cash, the agencies allow more leverage: 95% on a one-unit primary, and 97% where the existing loan is agency-owned and the first-time-buyer program allows. Mortgage insurance applies above 80% on that path.
| Factor | Cash-Out Refinance | Rate-and-Term (Limited Cash-Out) |
|---|---|---|
| One-unit primary LTV | 80% | 95% (97% in a narrow case) |
| Mortgage insurance | None at or below 80% | Required above 80% |
| Cash back | Meaningful | Incidental only |
| Seasoning | 12 months on loan paid off | Different test |
So the misconception to drop: “cash-out” and “rate-and-term” do not share an LTV cap. Only the second can go past 80%, and when it does, you pay for insurance.
Where the Rule Bends
A few edge cases are worth knowing before you plan around the 80% line.
The wholesale no-MI lane. This is the exception to the eighty-percent rule. A wholesale lane reaches 89.99% LTV with no mortgage insurance at a 680 score and a 50% ratio, on a thirty-year fixed, primary residence, conforming balance. It carries its own six months of seasoning. It is not an agency cash-out and it is not written in Texas. The tradeoff is that the lender prices the risk somewhere other than a monthly insurance line, and that pricing shows up in the terms you are quoted. Ask for both structures side by side before choosing. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Texas. A cash-out on a homestead, a Section 50(a)(6) loan, is capped at 80% of the home’s value by the state constitution. That 80% is state law, not an agency figure.
Delayed financing. If you bought with cash and want to pull money back out soon after, the new loan is generally limited to your documented initial investment plus closing costs, prepaids and points, and it is still tested against the cash-out caps.
Existing PMI. If your current loan carries PMI, it ends when that loan is paid off. The new loan is tested on its own LTV. The old policy does not follow you.
Lender-paid mortgage insurance. Not the same as no insurance. The insurance still exists. The cost moves into how the loan is priced. It is worth knowing the distinction when someone says “no PMI.”
Student loan cash-out. The standard cash-out LTV caps still apply, though the agencies describe a pricing feature for this transaction. Ask whether it fits your file.
Does Cash-Out Cost More Than a Regular Refinance?
Generally, yes. Cash-out refinances carry additional pricing adjustments from the agencies, called LLPAs at Fannie Mae and credit fees at Freddie Mac. That is why a cash-out prices higher than a no-cash-out refinance. This article does not quote prices. The practical point is that you should compare the total cost of the cash you take against alternatives, not only the PMI line.
If PMI does enter your file through a different structure, remember it has an end date. Under the Homeowners Protection Act, you can ask the servicer to cancel when your balance is scheduled to reach 80% of original value, and it must terminate automatically at 78%. Cancellation requires a written request and a certification of no junior liens. For a refinanced loan, “original value” generally means the appraised value at the time of the refinance. The CFPB explains the removal rules in plain terms. Those rights do not apply to loans classed as high risk.
Our conventional program sheet lists typical annual premiums of 0.58% to 1.86% of the balance. Treat that as a program-sheet range for orientation, not a quote.
What If Equity Is Too Thin?
Compare the options honestly.
| Your situation | Likely route |
|---|---|
| Need cash and want no PMI, equity above the cap | Cash-out sized under 80% |
| Only want PMI gone, no cash | Rate-and-term, if the new LTV is at or below 80% |
| Equity is thin, need some cash | Smaller cash amount, wait, or a different structure |
| Need more than 80% allows | Wholesale no-MI lane, if you fit it |
If you are close but short, three levers help. Pay down the balance first, which lowers LTV. Wait for appreciation or improvements to lift appraised value. Or take less cash. A cash-out is the wrong tool when the amount you need would push you over the cap and you are not eligible for the wholesale lane. In that case, keeping your current loan and leaving the equity alone may be a more affordable choice.
If your current loan is FHA, moving to conventional can shed FHA’s mortgage insurance, but only if the new LTV supports it. The same 80% math applies to the cash-out version.
A Practical Checklist
- Check seasoning. Is the loan being paid off at least 12 months old? Has someone been on title for six months, or does an exception apply?
- Build an appraisal cushion. Plan as if value comes in a little lower than your estimate. A small miss can push the final LTV over the cap.
- Decide on financed costs. Rolling closing costs into the loan eats room under the cap.
- Confirm occupancy and unit count. Two- to four-unit properties and second homes sit at 75%.
- Look at Projected Payments. On your Loan Estimate and Closing Disclosure, a monthly mortgage insurance line should be absent if you stayed under the cap.
- Credit and ratios. Wholesale conventional programs generally start at a 620 decision score, with a 50% total ratio ceiling on the automated finding. Subject to lender guidelines and full file review.
Key Terms Defined
LTV (loan-to-value): The new loan amount divided by the home’s appraised value.
PMI (private mortgage insurance): Insurance on a conventional loan that protects the lender when leverage is above 80%.
Cash-out refinance: A new first mortgage that pays off the old one and gives you meaningful cash from equity.
Limited cash-out (rate-and-term): A refinance that pays off your existing loan and costs, with only small cash back.
Seasoning: The minimum time a loan or your ownership must have existed before a refinance qualifies.
LLPA: A pricing adjustment the agencies apply for certain risk features, including cash-out.
Frequently Asked Questions
Can I take cash out above 80% and just decline PMI?
No. On an agency cash-out, the cap is the control. The loan cannot exceed it, so there is no above-80% option to decline insurance on. The only no-insurance path above 80% is the wholesale lane described above, for qualifying primary-residence files.
Does my old PMI carry over to the new loan?
No. Existing PMI ends when the old loan is paid off. The new loan is tested on its own LTV, so a new loan sized at or below 80% carries none.
Does the 80% limit mean I can borrow 80% of my equity?
No. It limits the whole new loan to 80% of appraised value. Your payoff and any financed costs come out of that amount first, and only the remainder reaches you as cash.
Why does the loan type matter if I only want PMI gone?
A rate-and-term refinance can remove PMI if the new loan lands at or below 80%, and it prices differently from a cash-out. If you also need cash, the cash-out cap applies instead.
Can PMI be removed later if I end up with it?
Often, yes. You may request cancellation at 80% of original value with good payment history, no subordinate liens and no decline in value, and the servicer must terminate it automatically at 78%. Subject to lender guidelines.
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’s cash-out refinance programs page lays out the options. Lendmire is a mortgage broker, not a lender, and nothing here is a commitment to lend.
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 conventional loan programs.
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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. Fannie Mae Selling Guide (charter eligibility)
2. Freddie Mac Guide §4203.1, LTV Ratios
3. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
4. CFPB: When Can I Remove Private Mortgage Insurance PMI from My Loan
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can You Do a Conventional Cash-Out Refinance Before Seasoning Ends? · How a Conventional Cash-Out Refinance Works Around Your Cash Timing
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- 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.