The Quick Read: MIP works on an FHA cash-out the same way it works on any new FHA loan, because a cash-out is a brand-new loan, not an edit to the old one. Your old loan’s mortgage insurance stops when it is paid off. A fresh upfront premium and a fresh annual premium start on the new loan. If you refinance from one FHA loan into another within a set window, part of the old upfront premium comes back as a credit against the new one. It is never a check to you.
- Upfront premium: 1.75% of the base loan, usually financed into the balance.
- Annual premium: a percentage of the balance, billed monthly. It varies by term, loan amount, and loan-to-value.
- Duration: on a thirty-year loan at or below 90% loan-to-value, the annual premium ends after eleven years. Above 90%, it lasts the full term.
- Leverage: the FHA cash-out reaches 80% loan-to-value on a home you have owned and lived in for 12 months.
- The clock: the new loan restarts the premium schedule. Your new appraisal does not cancel the old loan’s premium.
Key Terms Defined
Six terms come up again and again. Here they are once, in plain English.
MIP (mortgage insurance premium) is the insurance cost on an FHA loan. It protects the lender if you default, and you pay for it.
Upfront MIP (UFMIP) is the one-time premium, set at 1.75% of the base loan. Most borrowers finance it into the loan.
Annual MIP is the ongoing premium. It is figured on your loan balance for the year and collected in twelve monthly pieces inside your payment.
Base loan is the loan amount before any financed upfront premium is added.
Loan-to-value (LTV) compares what you owe to what the home is worth. A loan of 80% LTV leaves you holding 20% equity. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
PMI (private mortgage insurance) is the conventional-loan cousin of MIP. The two are priced and cancelled by different rules.
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.
What Happens to the MIP on Your Existing FHA Loan?
The old loan’s MIP ends when the old loan is paid off. A cash-out refinance closes out that loan, and a new one takes its place with its own premium schedule. Nothing carries over.
It is easy to assume otherwise. After a few years of paying MIP, a cash-out can look like a continuation. It is not. Think of it as selling your old loan to yourself and buying a new one with a new price tag attached. The paperwork is a new application, a new appraisal, a new case file, and a new set of premiums.
That reset is the single most important mechanic here. Everything below follows from it. For the program basics, including who can use this loan, see Lendmire’s FHA cash-out refinance program page.
How Does the Upfront Premium Work on the New Loan?
The upfront premium is 1.75% of the base loan, and you pick one of two paths: pay it in cash at closing, or finance all of it into the loan. The choice is all or nothing. Most borrowers finance it, and it does not count against the county loan limit that applies to your home.
Financing it has a side effect. Your final balance is slightly higher than the base loan, so you owe interest and annual premium on a bigger number. That is the trade for not bringing cash to the table.
Now the part that helps. If your existing mortgage is an FHA loan and you refinance into a new FHA loan inside the first three years of the old one, the old loan’s upfront premium earns you a credit. The credit reduces the upfront premium owed on the new loan. HUD’s FHA Connection guide on upfront premium payments and refunds explains that the system calculates the credit when the new loan’s premium is paid.
Three points about that credit:
- It shrinks as the old loan ages. The longer you waited, the smaller it gets, and past the window there is none.
- It works only FHA-to-FHA. Pay off an FHA loan with a conventional loan and there is no credit.
- It lowers a premium. It does not produce cash in your hand.
Skip the hope of a refund check. Plan for a smaller bill.
How Long Does the Annual Premium Last?
On a thirty-year FHA loan at or below 90% LTV, the annual premium ends after eleven years. Above 90% LTV, it lasts the entire term. A cash-out cannot go above 80%, so it lands in the shorter bucket. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
That is the good news about duration. The honest caveat is the clock. Those eleven years start over at your new loan’s closing. Say you spent four years paying premium on your old loan. The cash-out does not give you credit for those four years toward the eleven. You begin at zero.
A few more mechanics worth knowing:
- Annual premium is the base loan amount times the annual percentage, divided by twelve. The lender passes one-twelfth to HUD each month.
- The annual percentage runs between 0.15% and 0.75% across the program, depending on term, loan amount, and LTV. A cash-out usually sits toward the lower end of that range because of its 80% ceiling, though your exact tier depends on the term and amount you choose.
- HUD has cut annual premiums in the past, including one reduction of 30 basis points. An older loan does not get cheaper on its own. A cash-out creates a new endorsement, so it is priced on the schedule in force when it closes. Details are in HUD’s FHA INFO notice on the annual premium reduction.
Your new appraisal also does not shorten the old loan’s premium. HUD’s own excerpt on annual premiums, the Equity Saver sale document, says new appraised values are not used to cancel annual premium on an existing loan. Cancellation works from the original amortization schedule.
Why the 80% Cap Shapes Everything
The FHA cash-out is capped at 80% of the home’s adjusted value. HUD set that limit in its mortgagee letter on cash-out refinance leverage, and the same letter explains how adjusted value is measured. The cap used to be 85%, and 95% before that. HUD’s announcement of the change said the aim was to reduce risk in cash-out lending.
Three things follow from that cap.
It sets your cash ceiling. The appraisal decides the value. Eighty percent of that value is the most you can owe on the new loan. Subtract your payoff, the costs, and any financed upfront premium, and what remains is your cash. A low appraisal shrinks the cash. A high one grows it.
It leaves you equity. The Consumer Financial Protection Bureau’s guide to using home equity notes that lenders typically require you to keep 10% to 20% of the home’s value as equity. The FHA cash-out sits at the top of that range. No loan converts all your equity to cash.
It locks in the shorter premium tier. Since you cannot exceed 80%, you cannot end up in the lifetime-premium tier through a cash-out. That is a feature of the product, not a perk you can negotiate.
Free-and-clear homes follow the same cap. Owning your house outright still means you leave 20% equity behind.
FHA Cash-Out, Streamline, or Conventional?
The three paths treat mortgage insurance very differently. Here is a side-by-side.
| Factor | FHA Cash-Out | FHA Streamline | Conventional |
|---|---|---|---|
| Cash to you | Yes, up to 80% LTV | None | Yes, within its limits |
| Appraisal | Required | Not required | Usually required |
| Old FHA premium | Ends at payoff | Continues | Ends at payoff |
| Upfront credit | Yes, FHA-to-FHA window | Applies | None |
| New insurance | New FHA MIP | Premium continues | PMI if equity is thin |
The Streamline is the odd one out. It refinances an existing FHA loan with no appraisal, a limited credit review, and a net tangible benefit test. The premium continues rather than starting a brand-new cash-out schedule. It also pays out no cash. If you only want a different loan on the same balance, the Streamline may fit. If you want cash, you are in cash-out territory.
Conventional is the route that can end FHA mortgage insurance altogether. But it brings its own rules, and PMI may replace MIP depending on how much equity you keep. Whether the swap saves money depends on your equity, your credit, and the terms offered. Lendmire’s team can run both side by side.
Where the General Rule Breaks
Old loan past the refund window. After three years there is no upfront credit under the current schedule. You pay the full 1.75% on the new base loan.
Old loan older than the current rules. HUD kept special treatment for Streamline and Simple refinances of certain older FHA loans. A cash-out does not get that carve-out. It is priced under the current schedule.
Not owned or lived in for 12 months. The FHA cash-out needs the home to be your principal residence, owned and occupied for 12 months before the case number is assigned. Miss it and this loan is off the table. A different refinance may still work.
FHA to conventional. No credit. The refund exists only for FHA-to-FHA.
Payment history. Late payments on the existing mortgage get reviewed. A recent pattern can pull a file toward closer scrutiny, and the lender decides how it is treated.
Hawaiian Home Lands loans. These are a separate program with their own treatment. If that is your loan, ask the lender about it directly.
If the title raised a rental or second home, the answer is one sentence: occupancy decides the leverage, and this loan is for the home you live in.
Myths and Facts
Myth: refinancing an FHA loan removes MIP. Fact: a new FHA loan carries new premiums. Only moving to a non-FHA loan changes that.
Myth: MIP is for life on every FHA loan. Fact: duration depends on term and LTV at origination. A thirty-year loan at or below 90% LTV ends the annual premium after eleven years. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Myth: my home’s new value cancels the old loan’s premium. Fact: HUD does not use new appraisals to cancel annual premium on an existing loan.
Myth: I get my upfront premium back as a check. Fact: it is a credit against the new upfront premium, and only for FHA-to-FHA refinances in the window.
Myth: FHA still allows 85%. Fact: the cash-out cap is 80%.
Myth: a past rate cut helps my existing loan. Fact: premium reductions apply by endorsement date. Your new loan is endorsed at closing, so it follows the schedule then in force.
A Walkthrough Without Dollar Figures
Picture a homeowner with an FHA loan in its second year. She has lived in the house for far longer than 12 months. Her appraisal comes back and she is allowed up to 80% of that value.
Step one: the new loan pays off the old one. The old premium stops.
Step two: the new base loan is set. The upfront premium is 1.75% of that base. Because her old FHA loan is inside the three-year window, she gets a credit that lowers that 1.75% charge. She chooses to finance what remains.
Step three: the annual premium starts on the new, larger balance. It is the same kind of monthly charge as before, but the base is bigger.
Step four: the eleven-year clock starts at zero.
Her monthly payment reflects a bigger balance, a new term, and the new annual premium. That is the real cost of the cash. She also has less equity than before, which matters if values slip.
The borrower focuses on the cash figure. The monthly premium and the clock reset surface later. It is easier to run both numbers up front (the lender will, but ask).
Where to Find MIP on Your Disclosures
Your Loan Estimate and Closing Disclosure show both premiums. Check these spots:
- Loan costs and other costs: the upfront premium appears as a line item, with any credit reflected.
- Loan amount: a financed upfront premium raises the final balance above the base loan.
- Projected payments: annual MIP appears as its own line inside the monthly payment, next to principal, interest, taxes, and insurance.
- Cash to close or cash back: this is the number the 80% cap, your payoff, and your costs produce.
If the premium lines do not match what you expected, ask before you sign.
How to Decide
Start with your goal. Then match it to the structure.
- You need cash, and keeping an FHA loan is fine. The FHA cash-out fits, especially if your old FHA loan is inside the refund window. Cash is capped at 80% LTV.
- You want a different loan on the same balance. Look at the Streamline. It skips the appraisal and the cash.
- You have meaningful equity and good credit. Compare a conventional cash-out. PMI may replace MIP, and the swap can cost less or more.
- You have thin equity. The 80% cap may leave little or no cash. Run the numbers before paying for an appraisal. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Qualification is underwritten to FHA standards. The base ratio pair is 31/43 for housing and total debt with no compensating factors. Documented compensating factors can stretch that to 40/50 for the strongest files, and the automated finding governs most files. Everything here is subject to lender guidelines and full file review, and none of it is a commitment to lend.
Next Step
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 is a mortgage broker, so it arranges the loan through a wholesale lender rather than lending itself.
Frequently Asked Questions
Do I pay MIP again if I refinance my FHA loan into another FHA loan?
Yes. The new loan has its own upfront and annual premium. If you refinance within the three-year window, a credit from the old loan’s upfront premium lowers the new upfront charge. The annual premium restarts on the new balance.
Can a cash-out get rid of my FHA mortgage insurance?
Not an FHA cash-out. That loan carries new FHA premiums. Refinancing into a conventional loan ends MIP, though PMI may apply depending on your equity.
How long will I pay annual MIP after a cash-out?
On a thirty-year loan at or below 90% LTV, eleven years from the new loan’s closing. The FHA cash-out is capped at 80%, so it falls in that tier. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Does a higher appraisal cancel the premium on my old loan?
No. HUD does not use new appraised values to cancel annual premium on an existing loan. A higher appraisal helps your cash-out by raising the 80% ceiling.
Is the upfront premium credit paid to me?
No. It is applied against the new loan’s upfront premium. It exists only for FHA-to-FHA refinances inside the window, and it gets smaller as the old loan ages.
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. HUD, FHA Connection guide on upfront premium payments and refunds
2. HUD, FHA INFO notice on the annual premium reduction
3. HUD handbook excerpt on annual MIP
4. HUD mortgagee letter on the cash-out refinance LTV cap
5. HUD press release on reducing FHA cash-out leverage
6. CFPB, Using home equity guide
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 the Annual MIP Clock Works on an FHA Cash-Out Refinance · How Mortgage Insurance Works on an FHA Cash-Out for a Paid-Off Home · How Much FHA Cash-Out Closing Costs Add to Your Loan Balance
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
Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.