The Quick Read: Annual mortgage insurance on a new FHA cash-out loan is roughly the base loan times the annual premium rate, divided by 12 for the monthly figure. The base loan is everything you borrow except the financed upfront premium. A cash-out cannot exceed 80% of the home’s value, so it lands in the lower-leverage pricing tiers. Treat your result as a planning number, because your lender’s Loan Estimate controls.
Key Takeaways
- Two premiums exist: a one-time upfront premium of 1.75% of the base loan (usually financed), and an annual premium that runs between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV.
- Your base loan is the payoff of your current mortgage, plus any liens paid, plus cash out, plus financed closing costs. The financed upfront premium is not part of that figure.
- Because a cash-out tops out at 80% LTV, the annual premium runs for 11 years rather than the life of the loan.
- The premium is collected monthly, and the monthly amount steps down a little each year.
- Your estimate is a placeholder until the appraisal sets the value and the lender issues your Loan Estimate.
What Are You Actually Estimating?
You are estimating one recurring line in your future payment. FHA loans carry two kinds of mortgage insurance, and people blur them together constantly.
FHA cash-out estimate
Seeded with an example value, a balance to match, and a round cash request; change any field.
Editable benchmark: 7.18% as of November 5, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not an FHA cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the FHA cap on a principal residence with the upfront premium financed, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
An illustration, not a Loan Estimate, an approval, a quote, or a commitment to lend. The rate shown is the weekly Freddie Mac thirty-year conventional benchmark, used as a market reference; an FHA cash-out is priced by the lender at lock, and this is not an FHA cash-out refinance quote. HUD’s cap limits the base loan; the upfront premium is financed on top of the capped base loan; the monthly premium for the first year follows the snapshot’s schedule. Cash available means the base loan the cap permits less the balances retired, before closing costs, which this calculator leaves out. The line figure applies the line program’s combined loan-to-value ceiling to the same value and balance. Taxes and insurance are estimates you can edit. Licensed in sixteen states for consumer mortgages.
The first is the upfront premium. It is 1.75% of the base loan. Most borrowers finance it, meaning it gets added to the loan balance rather than paid in cash at closing.
The second is the annual premium, the one this article is about. Despite the name, you do not pay it once a year. It is collected inside your monthly payment.
Two other terms matter before you do any math:
- Base loan. The new loan amount before the financed upfront premium is added.
- Adjusted value. The appraised value figure the lender uses to apply the 80% cash-out cap. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Across the wholesale programs Lendmire places FHA files with, the FHA cash-out reaches 80% LTV on a home you have owned and lived in for 12 months before the case number. Here the focus is the insurance math. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Step 1: Gather Four Inputs
Before you calculate anything, collect these:
1. Your estimated home value. Treat this as a placeholder. The lender’s appraisal sets the real number.
2. Your current payoff. Your latest mortgage statement is a starting point, but a payoff statement is more accurate.
3. Any other liens you plan to pay off, such as a second mortgage or a tax lien.
4. How much cash you want out, plus a rough allowance for closing costs you expect to roll in.
You also need a term. Most cash-outs are thirty-year loans, and that is what this walkthrough assumes. A fifteen-year term or shorter prices differently, which comes up below.
Skip guessing at the premium rate for now. You will pull that from your lender in step 3.
Step 2: Build the Base Loan (Without Charging Insurance on Insurance)
The base loan is the number that drives everything. Here is the build:
- Payoff of your current mortgage
- plus any liens being paid
- plus the cash you want out
- plus closing costs you choose to finance
That total is your base loan. It cannot exceed 80% of adjusted value on a cash-out.
Here is the trap. Do not add the 1.75% upfront premium into this number. That premium is financed on top of the base loan, so your final loan balance is a little higher than the base. But HUD measures LTV on the base loan, and the regulation behind annual MIP excludes the financed upfront portion from the premium base. Add it in, and you charge insurance on insurance.
Is MIP charged only on the cash you take out? No. It applies to the whole base loan, including the part that simply pays off your old mortgage.
Picture a home where your payoff is about 55% of its value. You want cash equal to 20% of value and expect to roll in costs near 2%. Your base loan is about 77% of value, under the 80% ceiling. Annual MIP applies to all 77%, not just the 20% in your pocket.
Step 3: Pick Your Premium Tier
Three inputs set the annual premium rate and how long it lasts: the loan term, the base loan amount, and the LTV. That comes straight from HUD Mortgagee Letter 2023-05, which sets the current schedule and is incorporated into HUD Handbook 4000.1 as Appendix 1.0.
Here is how those three inputs play out on a cash-out.
| Input | What it does | Cash-out effect |
|---|---|---|
| Term | Terms over 15 years carry higher rates | Most cash-outs sit here |
| Base loan amount | A higher bracket costs more | A large loan can cross a HUD threshold |
| LTV | Higher LTV moves you up | Capped at 80%, so you stay in lower rows |
The cash-out cap matters here. HUD lowered the maximum LTV on cash-out refinances from 85% to 80% in 2019. Since the cap is 80%, you can never land in the higher-leverage tiers that carry the highest rates.
This article does not print the tier rates. Annual premium rates have been revised before, and some consumer sites still carry an outdated flat figure. Ask your loan officer to read the current Appendix 1.0 row for your term, base loan and LTV. Then use that exact rate in the next step.
Step 4: Turn the Rate into a Monthly Figure
The quick version has three moves:
1. Multiply your base loan by the annual premium rate.
2. That gives you the first-year annual MIP.
3. Divide by 12 for the monthly amount.
That shortcut slightly overstates the first year. HUD’s actual method, laid out on its monthly premium calculation page, uses the average outstanding balance over each year of the original amortization schedule. Then it multiplies by the rate and divides by 12.
The balance falls as you pay principal. So the average balance falls, and the monthly premium steps down each year. The regulation at 24 CFR 203.284 defines the base this way and excludes the financed upfront premium from it.
HUD says lenders typically collect annual MIP in 12 equal payments. The lender sets the amount from the schedule, so the figure you see on your Loan Estimate is the one that counts.
Run it on the example above. Your base loan is about 77% of value. Multiply by the rate your lender confirms, divide by 12, and you have a month-one estimate. Treat it as a ceiling for year one. Expect rounding differences against the lender’s figure.
How Much Does Each Extra Bit of Cash Add?
Annual MIP scales in a straight line with the base loan. Each additional 1% of your home’s value that you take out raises the base loan by 1% of value. The annual premium rises by that amount times your rate.
That sounds trivial until you see it stacked. Cash out, financed costs and payoffs all feed the same base. Rolling in closing costs raises the premium just like cash in hand does.
One edge to know: HUD sets a base-loan threshold above which the rate steps up in the over-15-year tier. A cash-out that crosses it costs materially more every month. County loan limits also apply to the amount you can borrow, and those change every year. Your lender will tell you where your county stands.
How Long Does Annual MIP Last on a Cash-Out?
For a cash-out, annual MIP runs for 11 years. HUD’s rule keys off your LTV at origination. At 90% or less, premiums run to the end of the term or 11 years, whichever comes first. Above 90%, they run to the end of the term or 30 years. HUD’s FHA answers page lays this out.
An 80% cap keeps every cash-out in the 11-year group. Two warnings follow from that same HUD page:
- The premium does not drop off at 80% LTV the way private mortgage insurance on a conventional loan can.
- You cannot request early cancellation by paying down principal. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
The way out of the premium is refinancing, which brings its own consequence. A new FHA loan starts a new premium schedule, and any treatment of the old loan’s upfront premium depends on the lender’s rules and the program. Ask about it before you count on a credit.
Where the Rule of Thumb Breaks
The simple formula works for most borrowers. These cases bend it:
- Larger base loans. Crossing the HUD threshold moves you to a higher rate.
- Shorter terms. A fifteen-year loan or shorter carries a much lower annual rate, and above the threshold the schedule splits by LTV.
- Borderline LTV. The regulation and the Handbook word the 90% cutoff slightly differently. Your lender resolves any case sitting right at the line.
- Low appraisal. A lower value shrinks the maximum loan. It changes your tier only if the base loan drops below, or you rework it around, a threshold.
- Special mortgage types. A few niche programs, such as Hawaiian Home Lands loans, handle premiums or the 80% cap differently. They are not part of a standard cash-out.
For a standard cash-out, you can ignore most of the exceptions. The ones that matter are base loan size and term.
Common Estimating Mistakes
- Adding the upfront premium to the base loan before applying the annual rate.
- Using a figure from an article or an older loan instead of the current Appendix 1.0 row.
- Estimating only on the cash you take out rather than the full base loan.
- Assuming the premium falls away at 80% LTV, or that it lasts for life.
- Treating the monthly figure as flat. It shrinks as the balance averages lower each year.
- Forgetting that financed closing costs enlarge the base loan. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Is the Estimate Worth Doing?
Yes, because the monthly insurance cost is part of what you will actually pay, and it belongs in any comparison of a cash-out against alternatives such as a conventional cash-out or keeping the loan you have. Total monthly cost, not just the base payment, is the fair comparison.
What to Confirm with Your Loan Officer
Before you rely on your estimate, ask for these in writing:
- The exact annual premium rate for your term, base loan and LTV
- The base loan figure, with payoffs and financed costs itemized
- How long the premium runs on your file
- How the lender treats your current FHA loan’s upfront premium, if you have one
All of this is subject to lender guidelines and a full file review. Nothing here is a commitment to lend.
Key Terms Defined
Upfront mortgage insurance premium (UFMIP). A one-time premium of 1.75% of the base loan, usually financed into the balance.
Annual mortgage insurance premium (MIP). A recurring premium charged as a percentage of the average loan balance and collected monthly.
Base loan. The new loan before the financed upfront premium; it is the figure HUD uses for LTV.
LTV (loan-to-value). The loan amount divided by the home’s value, shown as a percentage.
Average outstanding balance. The loan balance averaged across each twelve-month stretch of the original amortization schedule.
If You Are Weighing Your Options
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.
Frequently Asked Questions
Is annual MIP charged on the cash I take out or the whole loan?
The whole base loan. That includes the payoff of your old mortgage, any liens paid, financed closing costs and the cash out. The upfront premium is the only piece left out of the annual calculation.
Why does my monthly MIP go down over time?
HUD bases the premium on the average balance for each year of the original amortization schedule. As principal gets paid, that average falls, so each year’s monthly amount is a bit lower than the one before.
Does annual MIP go away once I reach 80% equity?
No. On FHA loans, duration depends on LTV at origination, not on later paydown. A cash-out at 80% LTV runs for 11 years on a thirty-year term, and HUD does not allow early cancellation by prepaying principal. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Can I finance the upfront premium?
Yes, in most cases. It adds to your loan balance but sits outside the base loan that HUD uses for LTV and for the annual premium calculation.
How close will my estimate be to the lender’s number?
Close enough to plan with, but not exact. The appraisal, rounding and the average-balance method all shift the figure. Your Loan Estimate shows the real amount.
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.
Get Started
Ready to find the right loan for you?
See your offer in seconds. No credit pull, no obligation.
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. HUD Mortgagee Letter 2023-05
3. HUD Monthly MIP Calculation
5. HUD FHA Answers: How long is MIP collected
This article is part of Lendmire’s FHA cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How FHA Cash-Out Reads an MIP Exit Plan Versus a Streamline · FHA Cash-Out vs Selling an Inherited Home as a Retiree · How an FHA Cash-Out Lender Reads Condo Litigation
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
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.