The Quick Read: Keep the whole new loan at or below 80% of the appraised value on a one-unit primary residence, and a standard conventional cash-out generally carries no mortgage insurance. The old loan’s insurance ends when it is paid off, so only the new loan’s leverage counts. Financed closing costs count toward that 80%. One wholesale lane goes higher than 80% with no mortgage insurance, under tighter conditions covered below.
Why Does Mortgage Insurance Show Up at All?
Mortgage insurance protects the investor who buys your loan, not you. Fannie Mae’s Selling Guide says the portion of a loan above 80% of value must carry insurance from an approved insurer.
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.
So on the agency path, mortgage insurance is required above 80% loan-to-value (LTV, the loan balance divided by the appraised value), with the wholesale no-mortgage-insurance cash-out lane as the one exception, and that lane gets its own section below.
A conventional cash-out refinance on a one-unit primary residence is written at 80% LTV, which is exactly where the insurance line sits. A standard cash-out stays at or under that line, so it generally carries no mortgage insurance. The wholesale lane is the single case that goes higher, under the tighter conditions covered later.
What Is a Cash-Out Refinance, Mechanically?
A cash-out refinance is a brand-new mortgage that pays off your existing loan and gives you the difference in cash. You use the money as you like.
Three things follow from that.
- The old loan is gone. Its mortgage insurance ends at payoff. Nothing carries over.
- The new loan is tested alone. Lenders divide the new balance by a fresh appraisal. Your old purchase price and old balance no longer matter.
- The cap covers the whole loan. The 80% limit applies to the entire new balance, not just the cash you pull out.
That last point trips people up. Equity is not the number to watch. The new total loan against appraised value is.
If you want to see the full menu, Lendmire’s cash-out refinance programs page lays out how the conventional options compare.
How Do You Find Your Own Mortgage Insurance Line?
Work through these steps in order.
1. Start with the appraised value. The lender orders the appraisal. A lower number than you expected shrinks everything below.
2. Take 80% of that value on a one-unit primary residence. That is your ceiling for the entire new loan.
3. Subtract your payoff. That covers the current first mortgage and any liens that must be paid off.
4. Subtract financed closing costs. Every cost rolled into the loan uses up room under the cap before you see any cash.
5. What remains is your maximum cash. If it is smaller than you hoped, you have a sizing decision, not a mystery.
Here is a plain-words example. Picture a home that appraises at a round number. Your cap is 80% of it. If your payoff already equals 65% of the value, the gap between 65% and 80% has to cover both your cash and your financed costs. Ask for more, and the loan crosses the line.
No dollar figures are needed to run this. Percentages of value do the work.
What Does the Lender Check Besides Leverage?
Leverage is one gate. Your file must clear the others too, subject to lender guidelines and full file review.
Seasoning. The first mortgage being paid off must be at least 12 months old, counted from its note date to the new note date. That is the rule in Fannie Mae’s cash-out guidance. At least one borrower must also have been on title for six months. Exceptions exist for delayed financing, inheritance and legal awards.
A recent rate-and-term refinance restarts that 12-month clock on the loan you would be paying off, so check the note date before you plan a cash-out.
Credit and ratios. Wholesale conventional programs generally start at a 620 decision score; the no-mortgage-insurance lane described elsewhere on this page sets its own higher bar of 680. The automated finding governs most files, with a total debt-to-income ratio ceiling of 50%. Manually underwritten loans use 36% or 45%, depending on score and reserves.
Credit events. Agency waiting periods apply: four years from a chapter 7 discharge, seven from a foreclosure, and four from a short sale or deed-in-lieu. Documented extenuating circumstances can shorten them.
Occupancy and units. Occupancy sets leverage. The cap is 80% on a one-unit primary residence. It is 75% on two- to four-unit primary residences, second homes and investment property. The Fannie Mae Eligibility Matrix is the agency’s table for these limits by transaction, occupancy and unit count.
Is There a Way to Go Above 80% With No Mortgage Insurance?
Sometimes. Across the wholesale programs Lendmire places files with, one lane reaches 89.99% LTV with no mortgage insurance on a cash-out. It is the single exception to the 80% rule on this page. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
The conditions are tight:
- A 680 decision score.
- A 50% total ratio.
- A thirty-year fixed rate.
- A primary residence.
- A conforming loan balance.
- Its own six months of seasoning.
It is not written in Texas. Texas has a separate rule for homestead cash-outs, covered below.
This lane is not a loophole. It is a different product with its own pricing and its own guidelines, and it exists only if the file fits every condition. Lender guidelines and full file review decide the rest.
What If Your Request Pushes the Loan Over 80%?
Say the numbers come back and your target cash would put you at 85%. You have four realistic moves.
Take less cash. The simplest fix. Trim the request until the total loan lands at or under the cap.
Pay down the balance first. A cash-in at closing lowers the new loan amount. You get less net cash, but you stay under the line.
Finance fewer costs. Paying some closing costs out of pocket frees LTV room.
Check the no-mortgage-insurance lane. If you are a primary-residence borrower with a 680 score and a conforming loan, the wholesale lane above may fit.
You could also accept mortgage insurance and take the larger loan. That is a real choice, but it is a different loan from a standard cash-out, and it is not the route this article is about.
Lendmire’s program sheet lists typical annual premiums of 0.58% to 1.86% of the balance on conventional loans that carry mortgage insurance. Treat that range as a general program figure, not a quote.
Rate-and-Term Is Not the Same Thing
A limited cash-out, also called rate-and-term, is a different transaction. It pays off your first mortgage, your closing costs and any purchase-money second lien. You get only incidental cash back.
Fannie Mae allows the lesser of 2% of the new loan or $2,000. Freddie Mac allows the greater of 1% of the new loan or $2,000. Take more than that, and the loan is reclassified as a full cash-out with the lower leverage cap. The same applies to paying off a second lien that was not a purchase-money loan, such as a HELOC used for other spending.
Because leverage is higher, mortgage insurance can apply. Rate-and-term reaches 95% LTV on a one-unit primary residence. It reaches 97% where the existing loan is agency-owned and the first-time-buyer program allows. Above 80%, insurance applies. The trade is clear. Rate-and-term gives you more leverage and almost no cash. Cash-out gives you cash and caps your leverage. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Buying out a co-owner under a written agreement counts as limited cash-out at both agencies.
Where the General Rule Breaks: Edge Cases
Delayed financing. A buyer who paid cash can take a cash-out loan soon after purchase. The new loan cannot exceed the documented initial investment plus financed costs, still under the cash-out caps. It does not escape the cap, so it does not escape the 80% rule either.
Homes owned free and clear. Freddie Mac lists these as a cash-out category with the same freedom over proceeds.
Texas homesteads. 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. The wholesale no-mortgage-insurance lane is not written there.
Manufactured homes. The agencies set much lower cash-out limits, and some single-width homes are not eligible. Confirm in the current matrix.
Second homes and rentals. Occupancy changes the limit, as noted above. Check the matrix and move on.
High LTV Refinance Option. Fannie Mae’s matrix says acquisition of these loans is suspended. Do not plan around it.
Renovation products. Some agency renovation and energy products treat proceeds spent only on eligible improvements as “no cash-out.” Check the current Guide for the specifics.
Side-by-Side: How the Options Treat Insurance and Cash
| Option | Leverage (one-unit primary) | Mortgage insurance | Cash to you |
|---|---|---|---|
| Standard cash-out | Up to 80% | Generally none | Yes |
| Wholesale no-MI lane | Up to 89.99% | None | Yes, tight conditions |
| Rate-and-term | Up to 95% (97% in cases) | Above 80% | Incidental only |
| Higher-leverage cash-out | Not a standard path | n/a | Reduced or fails |
Mortgage Insurance vs. Pricing Adjustments
Do not confuse the two. Mortgage insurance is a recurring premium that protects the investor. Loan-level price adjustments are extra charges built into the loan’s pricing based on risk, and cash-out loans carry them. Freddie Mac points lenders to its Exhibit 19 for credit fees on certain cash-out loans, per Guide §4301.5.
So a cash-out with no mortgage insurance can still cost more than a rate-and-term of the same size. Staying under 80% removes one cost. It does not remove all of them. Compare the full Loan Estimate, not one line.
What About the PMI You Already Have?
Your current insurance ends when the old loan is paid off. A cash-out resets everything.
That matters if you are weighing a cash-out against simply removing PMI on your current loan. The Consumer Financial Protection Bureau explains the standard path: you may ask the servicer to cancel at 80% of the original value, and the servicer must terminate it automatically at 78%. Cancellation requires a good payment history and no subordinate liens, and the value can’t have dropped below the original.
Those timing rules are statutory. The cash-out route is your own decision. If your only goal is to drop insurance and you don’t need cash, asking for cancellation can cost less than a refinance. If you do need cash, the new loan resets the clock, so keep it at or under 80% and you may never pay it again.
Myths Worth Dropping
- “I can borrow 80% of my equity.” No. The 80% applies to the whole new loan against value.
- “My current PMI carries over.” No. The old loan ends.
- “Mortgage insurance is optional if I ask.” Not on the agency path above 80%, unless you use the wholesale no-MI lane.
- “PMI drops automatically at 80%.” Automatic termination is at 78%. At 80% you must request it.
- “Delayed financing means wait, then refinance.” It is a cash-purchase exception with its own documentation limits.
- “Home value will do the work later.” A low appraisal can reduce your proceeds or push the loan over the cap.
Key Terms Defined
LTV (loan-to-value): The new loan balance divided by the appraised value of the home.
Cash-out refinance: A new mortgage that pays off the old one and gives you the difference in cash.
Limited cash-out (rate-and-term): A refinance that pays off your loan and costs with only small incidental cash back.
Seasoning: The minimum time you must hold a loan or title before refinancing.
Mortgage insurance: A premium that protects the investor when a loan is above 80% LTV. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Delayed financing: A cash-out allowed soon after a cash purchase, limited to the amount invested plus costs.
How Does the Decision Look in Practice?
Start with your goal. If you want cash and you are comfortable with a loan at or under 80%, a standard conventional cash-out is the cleanest answer, and it generally carries no mortgage insurance.
If you need more than that and you are a primary-residence borrower with strong credit, ask whether the wholesale no-mortgage-insurance lane fits. If you want more leverage but little cash, rate-and-term is the product. If you only want out of insurance, run the cancellation timing before you pay closing costs.
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. Everything here is subject to lender guidelines and full file review, and none of it is a commitment to lend.
Frequently Asked Questions
Does a conventional cash-out refinance require mortgage insurance?
Usually not. A standard cash-out on a one-unit primary residence is capped at 80% LTV, which sits at the insurance threshold. Mortgage insurance is required above 80% on the agency path, with the wholesale no-mortgage-insurance lane as the exception.
Can I get more than 80% without insurance?
Possibly. One wholesale lane reaches 89.99% on a thirty-year fixed, primary residence and conforming balance, with a 680 score and a 50% ratio. It has six months of its own seasoning and is not written in Texas.
Do financed closing costs count against the cap?
Yes. Anything rolled into the loan counts toward the 80%. Each financed dollar leaves less room for cash, so paying some costs out of pocket can raise what you receive.
What happens to my current PMI if I do a cash-out?
It ends at payoff. The new loan is tested alone, on its own LTV. If you keep it at or under 80%, insurance generally does not return.
What if my appraisal comes in low?
The cap applies to the new value. A lower appraisal shrinks your maximum loan. You can take less cash, put money in at closing, or pay some costs out of pocket.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Selling Guide (charter rule on mortgage insurance above 80% LTV)
2. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
3. Fannie Mae Eligibility Matrix
4. Freddie Mac Guide §4301.5, Cash-Out Refinance Mortgages
5. Consumer Financial Protection Bureau
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 Pay Off Private Mortgage Insurance · How PMI Works on a Conventional 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
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.