The Quick Read: A cash-out refinance can end private mortgage insurance (PMI), but only when the new loan lands at or below 80% of your home’s value after the cash and costs are added. The new loan pays off the old one, so the old PMI ends at payoff. The new loan carries mortgage insurance only above 80% leverage, and the one exception is a wholesale no-mortgage-insurance cash-out lane, covered below. This route fits homeowners with a lot of equity who also want cash. If you only want PMI gone, a cheaper path may exist. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Does a Cash-Out Refinance Really Get Rid of PMI?
Yes, when the math works. PMI is attached to your current loan. Refinance that loan and the policy ends. The new loan then needs its own mortgage insurance only if it starts above 80% of the home’s value.
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.
Here is the catch. A standard cash-out on a one-unit primary home tops out at 80% leverage. So you must keep roughly 20% equity after the new loan is sized. That means the cash you take out and any costs you roll into the loan both eat the same cushion. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Picture a homeowner whose current loan sits at 70% of the home’s value. They want cash equal to 6% of value and roll in costs of about 2%. The new loan lands at 78%. No PMI. Now picture a neighbor at 75% who wants the same cash and costs. That loan lands at 83%. PMI comes back, unless the wholesale no-mortgage-insurance lane described later fits.
These are modeled percentages, not market data. Your own appraised value decides where you land.
Do You Have to Refinance to Drop PMI?
No. Refinancing is one of three ways out, and it is often the most expensive one. Compare before you commit.
| Your goal | Best route | The catch |
|---|---|---|
| Drop PMI, keep the loan you have | Ask your servicer to cancel | Needs enough equity and a clean record |
| Drop PMI and change the rate or term | Rate-and-term refinance | New closing costs; PMI stays if above 80% |
| Drop PMI and pull cash out | Cash-out refinance | Cash and costs must fit under the leverage cap |
Cancellation costs you the least. On a conventional loan, you can ask to cancel when your balance reaches 80% of the home’s original value. The Consumer Financial Protection Bureau says that request must be in writing. You also certify that no junior liens sit behind your loan, and the servicer may ask for proof your value has not dropped.
Cash-out earns its place when you want the money anyway. It also fits when your loan is too young or your equity too thin for cancellation to work.
What Does a Cash-Out Refinance Look Like on Our Side of the Table?
Take a homeowner with a one-unit primary home and a first mortgage that closed more than a year ago. Across the wholesale programs we place files with, a standard cash-out on that home is written at up to 80% leverage, and mortgage insurance applies above 80% except in the wholesale no-mortgage-insurance lane described later in this article. The first mortgage being paid off must be at least 12 months old, counted note date to note date. You must have been on title for six months. Exceptions exist for delayed financing, inheritance and legal awards. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
You can see how the options line up on Lendmire’s cash-out refinance programs page. Nothing is a commitment to lend.
On credit and ratios, the wholesale conventional programs we work with start at a 620 decision score. The automated underwriting finding governs most files, with a total debt-to-income ceiling of 50%. A manually underwritten file runs tighter, at 36% or 45%, with reserve and score factors that vary.
Occupancy matters too. A cash-out on a two- to four-unit principal residence, a second home or an investment property is written at 75%, while the one-unit primary home keeps the 80% figure.
What Do Lenders Check Before Approving the Loan?
Five things decide the outcome. The appraised value is the one most people underestimate, because it sets your leverage.
| Factor | What is checked | Where it can stop you |
|---|---|---|
| Leverage | New loan vs. appraised value | Above the cap, PMI returns or the loan shrinks |
| Credit | Decision score and history | Below the program floor |
| Debt-to-income | Monthly debts vs. income | Above the ratio ceiling |
| Seasoning | Loan age and time on title | The 12-month and six-month clocks |
| Reserves | Savings after closing | Extra reserves can be required on higher-ratio files |
Reserve requirements differ by lender and by file, and the amount can rise as your ratio climbs, so your loan officer should confirm what applies to yours. The Fannie Mae Selling Guide sets out the agency’s cash-out rules, including the six-month title rule. Pricing for cash-out loans runs higher than for a plain rate-and-term refinance. Ask your loan officer to show you that difference in writing before you apply.
How Do You Apply, Step by Step?
Start with a screen, not an application. Many people skip this and waste an appraisal fee.
1. Estimate value and balance. Compare a realistic value for your home with what you owe. A rough read tells you whether 80% is even reachable.
2. Check the clocks. Confirm your loan is at least 12 months old and that you have been on title for six months.
3. Set your target. Decide how much cash you want and which costs you will roll in. Remember both draw on the same equity.
4. Gather documents. Expect income records, bank statements, ID, your current mortgage statement and proof of homeowner’s insurance.
5. Apply and get a Loan Estimate. Your broker submits the file for automated review. You receive a Loan Estimate that shows the loan terms and costs.
6. Order the appraisal. The value it returns sets your leverage.
7. Underwriting. The lender checks leverage, credit, ratios, seasoning and reserves. A title search confirms who owns the home and what liens sit on it.
8. Close, then confirm. Your old loan is paid off, and its PMI ends. Check your Closing Disclosure for the line showing the new loan has no mortgage insurance.
What If the Appraisal Comes In Low?
A low appraisal is the most common way this plan breaks. The same loan amount against a smaller value pushes leverage up. Suppose you planned for 79% and the value drops enough to put you at 84%.
You have four moves:
- Cut the cash out. A smaller loan brings leverage back under the cap.
- Pay costs out of pocket. Fewer financed costs means a smaller loan.
- Bring cash to closing. Paying down principal does the same job.
- Wait. If you are close, a stronger value later may fix the problem without any of the above.
Ask your loan officer for a break-even leverage number before you order the appraisal. Then you know exactly how much wiggle room you have.
When Is Cash-Out the Wrong Tool?
Skip it when you only want PMI gone and do not need cash. Servicer cancellation costs far less, because there are no new closing costs and no new balance. A refinance also resets your term and raises your balance by whatever you borrow.
Cancellation on current value is worth a look. Under the Fannie Mae Servicing Guide, a servicer may end mortgage insurance based on today’s value when you ask. The loan must be at 75% leverage or lower if it is two to five years old, or 80% or lower if it is over five years old. A valuation based on an inspection of both the interior and exterior is required. The same guide allows an 80% test when borrower-made improvements raised the value. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
A few other things block cancellation. A home equity line or second lien can stop it, since you must certify there are no junior liens. A late-payment history can too. Fannie Mae’s consumer page notes that some servicers look for no 30-day late payment in the past year and no 60-day late in the past two years.
Also remember the difference between asking and waiting. At 80% of original value, you have to ask. Automatic termination happens at 78% of original value, if you are current.
Where the General Rule Breaks
The 80% rule has edge cases, and a few matter for real borrowers.
Delayed financing. If you bought with cash in the past six months, you can take cash out against the home without waiting out the title clock. Cash-out leverage and pricing rules still apply. Documentation of where the purchase funds came from is required.
Homes that were listed for sale. A property listed for sale generally must be off the market by the disbursement date of the new loan.
Renovation and special-purpose loans. Some renovation products count as “no cash-out” when proceeds fund only eligible improvements. Freddie Mac also carves exceptions out of its own 12-month rule for certain construction and special-purpose loans. Ask your broker whether your project fits, and raise it early if it applies.
Lender-paid vs. borrower-paid insurance. With lender-paid mortgage insurance, the cost is built into the loan, and your cancellation rights differ. Find out which type you have before you plan around cancellation.
The wholesale no-mortgage-insurance lane. This is the one exception to the rule that mortgage insurance is required above 80% leverage. A wholesale lane we place files in reaches 89.99% leverage with no mortgage insurance. It needs a 680 score and a 50% ratio on a thirty-year fixed, a primary residence and a conforming balance, with its own six months of seasoning. It is not written in Texas. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Texas. A cash-out on a Texas homestead (a Section 50(a)(6) loan) is capped at 80% of the home’s value by the state constitution. State rules can add requirements elsewhere too.
FHA loans. FHA mortgage insurance is not PMI. The Homeowners Protection Act cancellation rights do not apply to it. If you hold an FHA loan, a refinance into a conventional loan may be the way out. You would need the equity and credit to qualify for conventional terms.
Does the Cost Make Sense?
Weigh three things against the PMI you would shed.
- Closing costs. A refinance has them. You can finance them, but financed costs use up equity under the leverage cap.
- Cash-out pricing. Cash-out loans cost more to price than rate-and-term loans. That difference can eat part of your PMI savings.
- A bigger balance and a reset term. The cash you take adds to what you owe. A new term can mean paying interest longer.
The CFPB notes that ending PMI lowers your monthly costs. A cash-out can still raise your total payment, because the loan is larger. Ask for a side-by-side that includes the new balance, the new term and total costs. The honest comparison is current loan plus PMI vs. new loan with no PMI. Ask your loan officer to build that on your own file before you decide.
Key Terms Defined
PMI (private mortgage insurance): Insurance on a conventional loan, paid by the borrower, that protects the lender when you put down less than 20%.
LTV (loan-to-value): Your loan amount divided by your home’s appraised value, shown as a percentage.
Cash-out refinance: A new loan that pays off your old mortgage and gives you the difference in cash, with no restriction on how you use it.
Seasoning: The waiting period a lender requires, such as time on title or the age of the loan being paid off.
Delayed financing: An exception that lets a recent cash buyer take cash out against the home without waiting out the full title clock.
Loan-level price adjustment: A pricing charge on a loan based on factors such as leverage and loan purpose. Cash-out loans carry these adjustments.
Your Decision in Practice
Run it in this order. First, ask whether you want cash. If not, try cancellation first. Second, estimate your leverage with the cash and costs included. If it lands at or under 80%, cash-out can end PMI. If it lands higher, shrink the cash, cover costs yourself or check whether the wholesale no-mortgage-insurance lane fits. Third, compare total cost against your current loan.
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
Does a cash-out refinance remove PMI?
Usually, yes. The old loan is paid off, so its PMI ends. The new loan avoids mortgage insurance when it sits at or below 80% of value, or when the wholesale no-mortgage-insurance lane fits. A low appraisal or large financed costs can push you back over the line.
How much equity do I need?
About 20% remaining after the new loan, for a standard one-unit primary home. Two- to four-unit homes, second homes and investment property are capped at 75%. The cash you take and the costs you finance both count against that equity.
Can I do a cash-out refinance right after buying?
Not usually. The loan you are paying off must be at least 12 months old, and you must have been on title for six months. Delayed financing, inheritance and legal-award exceptions exist. A recent cash buyer should ask about delayed financing.
Will a HELOC or second mortgage stop me from removing PMI?
It can block cancellation by request, because you must certify there are no junior liens. A refinance handles it differently. The new loan pays off your first mortgage, and the lender reviews how any second lien is treated.
Is a cash-out refinance better than asking my servicer to cancel PMI?
Only if you need cash or your loan does not meet the cancellation tests. Cancellation avoids new closing costs and a new balance. Cash-out makes sense when the cash has a real use and the equity is there.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Lendmire arranges FHA, VA, conventional and jumbo purchase and refinance loans through wholesale lenders; every file is underwritten by the lender under the applicable program guidelines. 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. The Consumer Financial Protection Bureau
2. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
3. Fannie Mae Servicing Guide B-8.1-04, Termination of Conventional Mortgage Insurance
4. Fannie Mae: What to Know About PMI
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Reserves Are Verified on a Conventional Cash-Out Refinance? · Cash-Out Refinance Requirements When You Want PMI to Go Away · Best Cash-Out Refinance Program Without PMI on a Conventional Loan
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
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.