The Quick Read: Usually none, because private mortgage insurance (PMI) is not a balance you pay off. The policy simply ends when the new loan pays off the old one. The cash you receive is whatever room is left under the loan cap (80% of the home’s appraised value on a one-unit primary residence) after the old payoff, any other liens, and closing costs.
Does a Cash-Out Refinance “Pay Off” PMI?
No. PMI is a monthly premium that protects the lender on a conventional loan with less than 20% equity. It has no payoff figure of its own. When your current first mortgage is paid off at closing, the servicer cancels the policy.
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.
Whether any unearned premium comes back to you depends on the type of policy, monthly or single-premium. Check your PMI disclosure or ask your servicer.
So the question changes. You are not asking how much cash covers PMI. You are asking how much equity the new loan can reach, and whether that loan needs mortgage insurance at all.
How Is the Cash Calculated?
The cash is the maximum new loan minus everything that has to be paid at closing. Here is the order of operations:
1. Get an appraisal. The cap is a share of appraised value, not a share of your equity.
2. Find the maximum loan. Multiply the appraised value by the cap. On a conventional cash-out refinance of a one-unit primary residence, the cap is 80%, per the Fannie Mae Eligibility Matrix. Subtract any other liens that stay in place.
3. Subtract the payoff. Take off your first mortgage balance plus accrued interest.
4. Subtract costs. Closing costs and prepaids come out next, whether you pay them in cash or roll them into the loan.
5. What remains is your cash.
Picture a home where the new loan is capped at 80% of its appraised value. If your current balance and costs already equal, say, 76% of that value, only about 4% of the home’s value is left to hand you. If they total 80% or more, nothing comes out.
That is the part most online calculators bury. Equity and available cash are different numbers. Having 25% equity does not mean you can take 25% out. The cap, the costs, and the appraisal all take a bite first.
Why 80% Is the Magic Number
Loans sold to Fannie Mae with a loan-to-value ratio (LTV) above 80% need mortgage insurance on the portion above 80%, per the Fannie Mae Selling Guide. LTV is simply your loan balance divided by the home’s value.
A conventional cash-out refinance on a one-unit primary residence stops at 80%. So on the standard agency path the new loan lands at or under the threshold, and PMI normally does not come back. That is the real answer to the PMI question. The cap and the insurance trigger sit at the same number.
There is one exception. Across the wholesale programs Lendmire places files with, one lane reaches 89.99% LTV with no mortgage insurance. It requires a 680 score, a 50% ratio, a thirty-year fixed rate, a primary residence, a conforming balance, and its own six months of seasoning. It is subject to lender guidelines and full file review. In Texas, a cash-out on a homestead is capped at 80% of value by the state constitution, and that lane is not written there.
What Shrinks Your Cash
Several things can shrink the amount of cash you take out:
- A second lien that stays. The 80% cap covers all liens combined. A home equity loan you keep uses up room.
- A lower appraisal. Value drives everything, so a lower appraisal shrinks your cash directly. It can also push the loan into insured territory.
- Closing costs. These come out of your proceeds or get added to the balance.
- Occupancy. Two- to four-unit primary residences, second homes, and investment properties cap at 75%, not 80%.
Seasoning matters too. The first mortgage being paid off must be at least 12 months old, counted note date to note date, and at least one borrower must have been on title for six months. The agencies allow exceptions for delayed financing, inheritance, and legal awards, per Freddie Mac’s Guide. The six months on title does not replace the 12-month age of the loan being paid off.
Credit and ratios count as well. The wholesale conventional programs start at a 620 decision score, and the automated finding governs most files with a total ratio ceiling of 50%. Cash-out loans also carry a pricing adjustment tied to LTV and credit score, and reserve requirements can apply, particularly when your debt ratio runs high. All of it is subject to lender guidelines and full file review.
When There Is Less Than 20% Equity
If the home cannot support a loan at or under the cap, a true cash-out is off the table. Two other routes exist.
A limited cash-out refinance is a rate-and-term refinance. The new loan pays off your first mortgage, closing costs, and any purchase-money second lien. Cash back is only incidental: at Fannie Mae, the lesser of 2% of the new loan amount or $2,000. At Freddie Mac, the limit is the greater of 1% of the new loan amount or $2,000.
Leverage reaches 95% on a one-unit primary residence. It reaches 97% where Fannie Mae owns the existing loan and the first-time-buyer program allows it, per the Fannie Mae limited cash-out rules. Above 80%, mortgage insurance is required, so this route does not remove PMI.
Waiting is the other route. If your loan was never going to reach 80% of today’s value, keep the current loan and let the balance fall, because PMI cancellation, covered next, may then do the work that a refinance cannot.
Cheaper Ways to Drop PMI
A cash-out refinance is one tool, and often the wrong one. Per the CFPB, you can ask to cancel PMI once your balance reaches 80% of the home’s original value. It must end automatically at 78% if you are current. Investors such as Fannie Mae and Freddie Mac sometimes have broader cancellation rules of their own.
A request to cancel generally needs a good payment history, no subordinate liens, and no decline in value. Servicers may also reconsider based on current value, though investor rules vary.
| Option | Cash to you | PMI outcome |
|---|---|---|
| Cash-out refinance | Leftover room under cap | Ends; new loan usually has none at 80% |
| Rate-and-term refinance | Only incidental | Ends; new loan insured above 80% |
| Request cancellation | None | Ends at 80% of original value |
| Automatic termination | None | Ends at 78% if current |
Does the Math Work for You?
Taking cash out resets your balance upward and usually restarts the term. Ending PMI lowers your monthly cost, as the CFPB notes. But a bigger balance can erase that savings.
Here is a simple decision rule. If your only goal is dropping PMI and you do not need cash, compare cancellation first. It carries no new closing costs. If you also need cash for a purpose you have already priced out, a cash-out refinance can make sense. Proceeds carry no use restriction.
For reference, Lendmire’s conventional program sheet lists typical annual mortgage insurance premiums of 0.58% to 1.86% of the balance. That is a program-sheet range, not a quote. Your actual figure depends on your file. Put that range next to the new loan’s added balance and closing costs to see if you come out ahead.
An FHA loan is different. FHA mortgage insurance works differently than PMI and may require a refinance to remove. If you hold an FHA loan, a conventional cash-out refinance is one way out, but your equity has to reach the cap.
Key Terms Defined
PMI (private mortgage insurance): Insurance on a conventional loan that protects the lender when your down payment or equity is under 20%.
LTV (loan-to-value): Your loan balance divided by the home’s appraised value.
Cash-out refinance: A new first mortgage that pays off the old one and gives you the difference in cash.
Limited cash-out refinance: A refinance that pays off the old loan and costs, with only a small, capped amount of cash back.
Seasoning: The waiting period before you can refinance or use certain funds.
Lien: A legal claim on your home, such as a first or second mortgage.
Frequently Asked Questions
Do I get a refund of the PMI I already paid?
Usually not much. Monthly PMI is paid as you go, so there is little unearned premium to return. A single-premium policy may differ. Your PMI disclosure or servicer can tell you which kind you have.
Will the new loan have PMI?
Not on the standard agency path, where the cash-out cap sits below the home’s full value and insurance generally applies only on higher-leverage loans. The wholesale no-mortgage-insurance lane is the exception, under the conditions described above and subject to lender guidelines.
Can I borrow 80% of my equity?
No. The cap is 80% of the home’s value, not of your equity, and every lien counts toward it. Your payoff and closing costs come out of that amount first.
Does a lower appraisal change my cash?
Yes, directly. A lower value shrinks the maximum loan, so the cash shrinks dollar for dollar. If the value falls far enough, the cash-out disappears.
Is waiting six months enough to refinance?
No. The loan being paid off must be 12 months old. The six-month title requirement is a separate clock that runs alongside it, with exceptions for delayed financing, inheritance, and legal awards.
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, 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 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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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 Eligibility Matrix
2. Fannie Mae Selling Guide (charter excerpt)
3. Freddie Mac Seller/Servicer Guide §4301.5
4. Fannie Mae Selling Guide B2-1.3-02, Limited Cash-Out Refinance
5. CFPB
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Cash-Out Refinance Requirements to Remove Private Mortgage Insurance · Cash-Out Refinance Options When You Have Private Mortgage Insurance on Your Current Loan · How Much Equity to Keep to Skip PMI on a Cash-Out Refinance
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.