The Quick Read: An FHA cash-out refinance carries two mortgage insurance charges. One is a 1.75% upfront premium on the base loan, and the other is a monthly annual premium. On a cash-out, the annual premium usually stops after 11 years, not at the end of the loan. That is because the loan tops out at 80% of the home’s value, which is below the 90% line that decides how long the premium lasts.
What Does an FHA Cash-Out Actually Charge for Mortgage Insurance?
An FHA cash-out charges the upfront premium once, at 1.75% of the base loan, and then charges the annual premium monthly. The two add together. The total depends on how big the loan is, how long you hold it, and which annual tier the loan lands in.
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.
Mortgage insurance premium (MIP) is the cost of FHA’s backing. It protects the lender if you stop paying, and it is the trade-off for FHA’s flexible credit and leverage rules. You pay it, but the lender is the one protected.
Here is how the two pieces behave:
- Upfront premium: 1.75% of the base loan, charged once. Most borrowers finance it, which means it rides on top of the loan balance instead of coming out of pocket at closing.
- Annual premium: Across the wholesale programs Lendmire places FHA files with, it falls between 0.15% and 0.75% of the balance per year. The exact figure depends on term, loan amount, and loan-to-value (LTV). You pay it in monthly installments.
One more point matters for the “life of the loan” question. Cash-out is its own animal, because the 80% cap changes which duration tier you land in. We get to that next.
Why “Life of the Loan” Is Usually the Wrong Frame
For most FHA cash-outs, the annual premium ends after 11 years. The “pay it forever” reputation comes from low-down-payment purchase loans, which start above 90% LTV. A cash-out cannot start there.
LTV, or loan-to-value, compares the loan to the home’s appraised value. A loan at 80% LTV means the loan is 80% of what the home appraises for. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
FHA’s duration rule splits at 90% LTV on the day the loan is made. HUD’s FHA guidance on MIP duration lays it out. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
- Above 90% LTV at origination: annual premium is collected until the end of the term, or 30 years, whichever comes first.
- At or below 90% LTV: annual premium is collected until the end of the term, or 11 years, whichever comes first. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Now put the cash-out cap next to that rule. An FHA cash-out reaches 80% LTV on a home you have owned and occupied for 12 months before the case number. HUD Mortgagee Letter 2019-11 cut that limit from 85% to 80% of the home’s adjusted value, and it covers the combined loan-to-value too. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
So the new loan starts at or below 80%, and 80% is under 90%. A 30-year FHA cash-out therefore lands in the 11-year tier. HUD does not state that in a single sentence. It comes from putting the two rules together, and it matches how Lendmire sees these files priced week after week.
How the Cost Gets Built, Step by Step
The insurance cost on a cash-out follows a fixed sequence. Each step feeds the next.
1. The appraisal sets value. The 80% cap applies to adjusted value, which is the appraised value after FHA’s own adjustments.
2. The cap sets the ceiling. The new first loan, plus any second lien that stays in place, cannot exceed 80% of that value.
3. The base loan is fixed. The base loan amount is the loan before any financed upfront premium is added. Both the upfront premium and the duration test work off this number.
4. The upfront premium is added. It is 1.75% of the base loan. HUD Mortgagee Letter 2023-05 sets that figure for nearly all FHA mortgages. If you finance it, your balance grows by that amount, and the annual premium is then charged on that larger balance.
5. The annual tier is picked. Term, base loan amount, and original LTV decide it. The same mortgagee letter cut annual premiums by 30 basis points for most loans when it took effect, and it raised the loan-amount threshold that separates the tiers.
6. The duration clock starts. On a 30-year loan at or below 90% LTV, the monthly premium runs for 11 years and then stops.
The lifetime cost comes down to a simple formula:
Total MIP ≈ upfront premium (1.75% of the base loan) + the annual premium for each of 11 years, each charged on the balance that remains that year.
Notice what happens inside that formula. The balance shrinks a little every month as you pay principal. So the annual premium costs slightly less each year even though its percentage stays flat. The upfront piece is a one-time hit, and the annual piece is a long, slowly declining drip.
After year 11 the insurance line drops off your payment. You keep paying principal and interest for the rest of the term.
The Two Tiers Side by Side
The easiest way to see the difference is to compare a cash-out against a loan that starts with a thin down payment.
| Factor | FHA cash-out | High-LTV FHA purchase |
|---|---|---|
| Starting LTV | 80% or less | Above 90% |
| Annual premium length | 11 years (30-year term) | Full term, up to 30 years |
| Why | Cap keeps it under 90% | Starts over 90% |
The upfront charge is identical. The duration is what changes. Over 30 years, an insurance line that runs the full term costs far more than one that stops at year 11.
A Planning Picture: Two Homeowners, One Loan Type
Take two homeowners who each do an FHA cash-out at the 80% cap. The percentages are the same for both. Only the time horizon differs.
Homeowner A plans to stay 15 years. They pay the upfront premium, which was financed. They pay the annual premium for 11 years. Then the insurance line disappears, and they enjoy four years of payments without it. Their lifetime MIP is the upfront piece plus the 11-year drip.
Homeowner B sells after four years. They have paid the upfront premium in full through the balance. They have paid only four years of annual premium. When they sell, the payoff settles everything. The upfront piece is spread over far fewer months, so each month carried the loan costs more in insurance terms.
The upfront premium is a fixed cost. The longer you hold the loan, the more months you spread it over. Holding for a short stretch makes that premium weigh heavily. That is worth knowing before you refinance into a loan you may not keep.
Where the General Rule Breaks
The 11-year answer is the usual outcome. It is not the only one. These are the edge cases that change it.
Older case numbers. The 90% split applies to loans whose FHA case numbers were assigned after HUD’s duration rule change. Loans from before that follow the older duration rules. If you are comparing a refinance against a very old FHA loan, check the case-number date.
A new cash-out starts a new clock. Say your current FHA loan carries premium for its full term because you bought with a thin down payment. A cash-out replaces it with a brand-new loan. The new loan has its own LTV, its own tier, and its own 11-year clock. The old duration does not carry over. This is the main reason a cash-out can shorten your insurance timeline. It follows from the rule that duration is set at origination.
Exempt loans. A few loan types skip some premiums. Loans under the Indian Lands program carry no upfront premium at all, and certain Hawaiian Home Lands loans are carved out of other rules. None of these is a typical cash-out. They are mentioned so nothing here reads as a universal claim.
Streamlines are a different tool. An FHA Streamline refinances an existing FHA loan with no appraisal, a limited credit review, and a net tangible benefit test. It pays out no cash, and the premium continues. Its leverage can run above 90%, which puts it in the longer duration tier. A cash-out and a Streamline are not interchangeable on the insurance question.
A partial upfront refund. When one FHA loan is refinanced into another FHA loan within the first few years, a partial refund of the earlier upfront premium may apply. The amount depends on how long the earlier loan has been in place. Ask your loan officer to confirm what it would be on your file.
Refinancing out of FHA. The only way to end FHA premiums early is generally to refinance into a non-FHA loan. That swaps FHA insurance for conventional rules, which are different. The refinance costs money of its own, so the swap has to earn its place.
Schedule changes. FHA changes its insurance schedule from time to time, so confirm the current schedule before you decide. The tiers and cutoffs here are the framework.
What the Premium Does to Your Monthly Budget
The annual premium is one line in your housing payment, and it counts in your debt ratios. Across the wholesale programs Lendmire works with, the base pair of ratios is 31/43 (housing to total debt). Documented compensating factors can stretch that to 40/50 at the top tier.
Two features of cash-out make the premium bite a little harder than on a plain refinance:
- The balance is brand new. It includes the cash you take out and the financed upfront premium. The annual premium is calculated on that bigger number.
- The base resets. Even if your old balance was small, the new one is not.
Cash in hand is also smaller than 80% of the home’s value. The 80% cap covers the whole new loan. From that room, the payoff of your current loan comes off first, then any second lien that stays, then financed costs. What remains is your cash. People often hear “80% LTV” and assume they receive 80% in cash. They do not.
Myths That Cost People Money
“Every FHA loan carries MIP for life.” Only loans that start above 90% LTV do. A cash-out starts at 80% or lower, so it typically ends at year 11.
“Paying down to 80% ends FHA insurance.” On a loan that began above 90%, it does not. Conventional mortgage insurance cancellation rules do not apply to FHA. The original LTV fixes the duration.
“FHA cash-out goes to 85%.” That was the old limit. It is 80% now. Older web guides still quote 85%, and they are out of date.
“80% LTV means 80% in cash.” It caps the whole loan, as covered above. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
“The premium cut applies to every loan.” It applies to loans endorsed on or after its effective date, with the exceptions listed earlier. HUD’s own FHA announcement of the 30 basis point cut is the source for that change.
“MIP is the same as PMI.” They are different products. FHA sets MIP percentages itself, and the cancellation rules are not the conventional ones.
How to Decide in Practice
Start with how long you plan to hold the loan. Then work through these questions.
1. How much of the equity do you really need? A larger cash-out raises the balance and everything charged on it. Take what the project needs, not the maximum.
2. Is a second lien in play? It counts against the 80% cap, which can shrink your cash.
3. Do you meet the occupancy test? You must have owned and occupied the home for the 12 months before the case number. Homes owned free and clear can still be refinanced as cash-out.
4. How long will you keep this loan? If it is under a few years, the upfront premium weighs heavily.
5. Is a non-FHA path realistic? Ask for a side-by-side with a conventional cash-out. Your credit, your equity, and your debt ratios decide which one fits.
Credit matters too. The wholesale programs Lendmire places FHA loans with start at a decision score of 580. Some lenders set a higher floor. Programs and overlays differ, which is why the comparison belongs on a Loan Estimate, not in a headline.
Key Terms Defined
MIP (mortgage insurance premium): FHA’s mortgage insurance, paid by the borrower, which protects the lender if the loan goes unpaid.
Upfront premium: The one-time MIP charge, 1.75% of the base loan, usually financed into the balance.
Annual premium: The recurring MIP charge, billed monthly as a percentage of the remaining balance per year.
Base loan amount: The loan before any financed upfront premium is added. Both the upfront charge and the duration test use it.
Adjusted value: The appraised value after FHA’s own adjustments. The 80% cash-out cap is measured against it. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
LTV (loan-to-value): The loan amount divided by the home’s value, shown as a percentage.
Frequently Asked Questions
Does an FHA cash-out charge the same upfront premium as a purchase?
Yes, in nearly all cases. The upfront premium is 1.75% of the base loan on FHA mortgages, with narrow exceptions for certain loan programs. A cash-out has no separate or higher upfront charge. What differs is the loan size, since the new balance includes the cash you take out.
Can I finance the upfront premium on a cash-out?
Yes. Most borrowers add it to the loan balance, so nothing extra comes out of pocket for it at closing. The trade-off is a larger balance. The annual premium is then calculated on that larger balance, and you pay interest on the financed amount for as long as you hold the loan.
Will I pay MIP for the whole 30 years?
Usually not on a cash-out. A standard FHA cash-out tops out at 80% LTV, which falls in the tier where the annual premium ends after 11 years. The upfront premium is paid once. Loans that start above 90% LTV are the ones that run for the full term, up to 30 years.
Does paying down my loan end the premium earlier?
No. On a loan made after the duration rule changed, the original LTV fixes the duration. Extra payments reduce the balance, which lowers the dollar cost of the annual premium. They do not shorten the 11-year clock. Ending it early generally means refinancing into a non-FHA loan.
Is any of the upfront premium refundable if I refinance again?
Possibly. A partial refund may apply when you refinance one FHA loan into another within the first few years. The refund shrinks as time passes. Your loan officer can confirm the schedule that applies to your file, subject to lender guidelines and full file review.
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.
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.
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References
1. HUD FHA Answers: How long is MIP collected
2. HUD Mortgagee Letter 2019-11
3. HUD Mortgagee Letter 2023-05
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: Banks That Offer an FHA Cash-Out Refinance When Your Current Mortgage Is an FHA Loan · How to Replace an Existing FHA Loan With a New FHA Cash-Out · How to Skip a Business Loan and Fund a Rental With FHA Cash-Out
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.