The Quick Read: if you already pay the FHA mortgage insurance premium (MIP), a conventional cash-out can remove that line item when your equity and credit are strong. An FHA cash-out fits when your credit, debt load, or paperwork would make a conventional file harder to approve. Both options pull cash from your equity and both replace your current loan. The better pick depends on how much equity you really hold, how long you plan to stay, and what your file looks like today.
Lendmire is a mortgage broker, not a lender. It arranges FHA cash-outs through wholesale lenders, and its FHA cash-out refinance program page covers the program basics. This article puts the two options next to each other so you can see where each one wins.
Key Takeaways
- A new FHA cash-out tops out at 80% loan-to-value and requires 12 months of owning and living in the home before the case number is assigned.
- FHA charges an upfront premium of 1.75% of the base loan (financed), plus an annual premium. Conventional cash-out generally skips private mortgage insurance at its own cash-out cap, which the lender sets.
- Refinancing out of FHA into conventional forfeits any upfront premium refund. Refinancing FHA into a new FHA loan may keep a partial credit in the first three years.
- A new loan of either type resets your balance, your term, and your insurance clock. Compare total cost over the time you will actually hold the loan.
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.
Side-by-Side
| Factor | FHA Cash-Out | Conventional Cash-Out |
|---|---|---|
| Maximum leverage | 80% LTV | Generally at or below FHA’s cap |
| Credit floor | Starts at 580 on programs Lendmire places | Generally higher; lender sets it |
| Mortgage insurance | 1.75% upfront plus annual premium | Generally none at the cash-out cap |
| Insurance exit | Annual premium ends after 11 years at 90% LTV or less | Private insurance can be removed with equity |
| Occupancy | Owner-occupied primary home | Primary home; lower limits on second homes and 2–4 units |
| Ownership requirement | 12 months owned and lived in | Six months on title, with exceptions |
| Ratios | Base 31/43; up to 40/50 with documented factors | Automated finding; reserves may apply to higher ratios |
| Property types | Owner-occupied, one to four units | Broader, with leverage that varies by type |
Two cautions on this table. Conventional numbers differ by lender and by property type, so treat that column as a direction rather than a promise. The FHA column comes from the programs Lendmire places loans with. Every figure is subject to lender guidelines and a full file review.
Key Terms Defined
Upfront premium (UFMIP): a one-time FHA mortgage insurance charge, 1.75% of the base loan, usually added to the balance rather than paid in cash.
Annual MIP: the ongoing FHA insurance charge, built into your monthly payment. It runs between 0.15% and 0.75% of the balance depending on term, loan amount, and LTV.
Private mortgage insurance (PMI): insurance on a conventional loan when you borrow above a set share of the home’s value. It is generally removable as equity grows.
Loan-to-value (LTV): your new loan balance divided by the appraised value of the home.
Seasoning: the time you must own, or occupy, the home before a lender will allow a cash-out.
Right of rescission: your window to cancel certain refinances on a principal home after you sign.
What Happens to the MIP You Already Pay?
A new FHA cash-out replaces the old FHA loan, so the insurance clock restarts. That is not always bad news. On a thirty-year loan above 90% LTV, the annual premium lasts for the full term. A cash-out capped at 80% LTV falls under the 90% line, so the annual premium on the new loan ends after eleven years. A homeowner who began with a minimal down payment could move from lifetime MIP to an eleven-year MIP. That shift deserves a place in your comparison. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
The upfront premium works differently. HUD’s FHA Homeowners Fact Sheet says a refund credit from the old premium may be applied to the new loan’s upfront premium on an FHA-to-FHA refinance, with the credit available in the first three years. HUD also notes the refund rules can change. Move to conventional and that credit goes away. In the first three years it matters. After that, the point mostly drops out of the comparison.
Conventional is a different animal. Fannie Mae’s consumer site says private mortgage insurance can generally be removed at about 20% equity, while FHA mortgage insurance is more complicated and may involve refinancing. If you left FHA through a conventional cash-out at or under the cap, the insurance line would generally go away on day one.
One more option sits beside both. An FHA Streamline refinances an existing FHA loan with no appraisal, a limited credit review, and a net tangible benefit test. The premium continues. It does not pull cash out, so it answers a different question.
When FHA Cash-Out Is the Better Fit
FHA is the better fit when your file is the problem, not your equity. Several situations point that way.
Your credit has been bruised. The FHA programs Lendmire places loans through start at a 580 decision score. Some lenders set a higher floor, so the range you see depends on who reviews the file. Conventional programs generally ask for more.
Your debt load is heavy. The base FHA pair is 31/43, housing to total debt. Documented compensating factors can stretch that to 40/50 at the top tier, and the automated finding governs most files. Conventional underwriting can be less forgiving at higher ratios and may add reserve requirements.
You want the shorter MIP. If the home appreciated and your existing FHA loan began above 90% LTV, an FHA cash-out at or under 80% can convert lifetime MIP into an eleven-year MIP. That is a real change for a homeowner who expects to hold the home a long time. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
You are inside the three-year refund window. A new FHA loan may carry a credit from the old upfront premium. That can soften the cost of the new one.
The tradeoff is simple. You pay 1.75% upfront, usually financed, and an annual premium for as long as it runs. Financing the premium raises your balance, and interest accrues on the larger balance. Weigh that against the paperwork and approval flexibility you gain.
When Conventional Cash-Out Is the Better Fit
Conventional is the better fit when your equity and credit are strong and you want the insurance gone.
You have real equity. Conventional cash-out generally carries no private mortgage insurance at the cap, because insurance is generally required only above a set LTV. That is the main way a cash-out removes the MIP line item. The CFPB says private mortgage insurance is generally cheaper than FHA mortgage insurance for borrowers with good credit.
Your credit is solid. A stronger score helps with eligibility and pricing on the conventional side. It also matters because the borrowers who gain the most from conventional are the ones who do not need FHA’s flexibility.
Your ratios fit comfortably. If your income comfortably covers the new payment and your other debts, a conventional file can run clean. Higher ratios may require reserves.
You plan to keep the home for many years. A loan with no insurance charge compounds in your favor over time. A homeowner who sells in a few years may never recoup what a conventional refinance costs to set up.
The tradeoffs? Conventional underwriting is stricter on credit and may offer less leverage on second homes and 2–4 unit properties. A fifth thing to watch: Fannie Mae’s Selling Guide sets a six-month ownership requirement for cash-out, with an exception called delayed financing for borrowers who paid cash. Check the current version before you rely on any timing.
Three Homeowners, Three Answers
Picture a homeowner who bought with the minimum investment, kept the FHA loan for several years, and now sits well under 80% LTV after price growth. Credit has improved and ratios are modest. A conventional cash-out looks strong here: the insurance goes away, and the equity cushion is wide. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Consider a second homeowner with the same equity but a recent run of late payments and a heavier debt load. A conventional file may stall on credit or ratios. An FHA cash-out at 80% LTV or below may still work, and the annual premium would end after eleven years rather than lasting for the loan’s term. The flexibility has a price, but so does having no path at all. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Run the numbers on a third case. The homeowner’s FHA loan is two years old and the upfront premium refund still applies. Moving to a new FHA loan may preserve part of that credit. Moving to conventional forfeits it. The refund can tilt a close call toward FHA, though it will not rescue a bad fit.
(The point of these cases is the pattern. Equity, credit, and ratios decide the answer, in that order of importance.)
Does “No PMI” Mean Cheaper?
Not by itself. Skipping insurance removes one charge, but several costs travel with every cash-out.
Closing costs vary by file and can include origination fees, appraisal fees, title insurance, and taxes. A CFPB cash-out research report notes that many borrowers use part of the proceeds to cover them. Financing those costs raises the balance and the interest that builds on it.
A cash-out also resets your balance and term. The payment can rise even if you only wanted to move debt around, and a longer term lengthens the time to pay it off. The real test is total cost over the years you will hold the loan.
Here is how to compare two offers fairly:
- Line up the Loan Estimates side by side.
- Check cash to close separately from total closing costs. They are different numbers.
- Add the insurance cost over the years you expect to keep the loan, and compare it to the savings on the other side.
- Subtract what the cash-out will cost you in a larger balance, not just in fees.
One thing is certain: a conventional loan with no insurance and a worse overall package is still the worse choice.
What the Lender Checks Before You Close
Both paths rely on an appraisal, since the cap is a percentage of the home’s value. The cash available depends on the appraised number and your payoff balance. Financed costs and insurance come out of that room.
Payment history is next. For FHA cash-out, HUD requires the lender to document the previous 12 months of payment history. Describe any late payment candidly to your loan officer before the file is submitted. Credit, income, debts, and occupancy complete the review. FHA runs on an automated scorecard or manual underwriting. Conventional runs on automated underwriting or manual review.
Occupancy matters too. FHA cash-out is for your principal residence, with at least one borrower owning and living in the home for 12 months before the case number. If the home is a second home or a rental, occupancy decides the leverage and the options narrow. A mortgage broker can tell you which path applies.
Closing and the Three-Day Cancel Window
A cash-out on your principal home carries a right to cancel. Per the CFPB, you have until midnight of the third business day to cancel a refinance. Saturdays count; Sundays and legal holidays do not. The clock starts after you receive the signed note, the Truth in Lending disclosure, and two copies of the rescission notice. If the lender fails to deliver the required notices, the right can extend to three years.
Cancelling does not erase your original loan. It simply stops the new one. Funds are disbursed after the window ends.
Mistakes to Avoid
- Assuming FHA mortgage insurance drops off at 80% LTV like PMI. FHA duration is set at origination, not by later equity gains.
- Assuming the 2023 premium cut lowered the upfront cost. HUD’s announcement covered the annual premium only.
- Treating zero cash to close as zero cost. Costs may come from proceeds or be financed.
- Quoting an old FHA cap. An older HUD archive showed 85% on cash-out. The current cap is 80%.
- Cashing out more than the goal needs. A larger balance means more interest, whichever program you choose. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
The Balanced Verdict
Neither option wins on its own. Conventional wins when you have strong equity, healthy credit, and comfortable ratios, and when you want the insurance gone. FHA wins when your credit or debt load makes conventional a harder fit, or when moving from lifetime MIP to an eleven-year MIP is the real prize.
The honest tiebreaker is time. Hold the home for many years and the insurance difference grows. Plan a sale in a few years and the setup costs may outweigh any savings.
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. Every program figure here is subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Frequently Asked Questions
Will a conventional cash-out get rid of my FHA mortgage insurance?
Usually, yes, when your new loan sits at or under the cash-out cap and the lender does not require private mortgage insurance. Your old FHA premium ends because the old loan is paid off. Any upfront premium refund is forfeited when you leave FHA. Confirm with the lender whether insurance applies on your file.
How long does MIP last on a new FHA cash-out?
On a thirty-year loan at or below 90% LTV, the annual premium ends after eleven years. A new FHA cash-out is capped at 80% LTV, so it falls in that category. The clock restarts with the new loan, though, so it does not carry credit for years you paid on the old one. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Can I get the upfront premium back if I refinance?
Possibly, but only on an FHA-to-FHA refinance and only within the first three years, per HUD’s fact sheet. If you move to conventional, the refund does not apply. HUD notes that refund rules can change, so confirm the current rule.
Is FHA cash-out easier to qualify for than conventional?
It is generally more flexible on credit and ratios. The programs Lendmire places loans with start at a 580 decision score, with a base ratio pair of 31/43 and documented factors reaching 40/50. Conventional underwriting tends to ask for more. Lenders add their own overlays either way.
How much equity do I need to take cash out of my home?
You must stay at or under the program’s LTV cap after the new loan is added. For FHA cash-out that cap is 80% of the appraised value. Conventional caps generally sit at or below that level, with lower limits on second homes and 2–4 unit properties. Your payoff balance and financed costs use up part of the room.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. HUD FHA Homeowners Fact Sheet
5. HUD Mortgagee Letter 2020-30
6. CFPB
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 to Use the Inheritance Exception on an FHA Cash-Out · How an FHA Cash-Out Reads Credit for a Locked-in Homeowner · How FHA Cash-Out Equity Data Works for a Lock-in Homeowner
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
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.