The Quick Read: A cash-out refinance drops mortgage insurance only when the new loan lands at or below 80% of the home’s appraised value, and no lender or bank sells that as a separate product. Dropping the insurance is a result of the new loan-to-value, not a feature. Which lenders write it, and on what terms, depends on your property, credit, equity and current loan type. Lendmire is a mortgage broker, so the work is matching your file to the right program rather than pointing you at one bank.
Key Takeaways
- Conventional cash-out tops out at 80% LTV on a one-unit primary home, and mortgage insurance falls away at that same ceiling, with one wholesale lane as the exception.
- Plain cancellation at 80% or 78% may be cheaper than a refinance if you don’t need cash.
- An FHA Streamline keeps FHA mortgage insurance. Leaving FHA insurance behind usually means refinancing into a conventional loan.
- That wholesale lane reaches higher leverage, up to 89.99% LTV, with no mortgage insurance, under narrow conditions covered below.
What Is a Cash-Out Refinance, and Why Does It Remove Mortgage Insurance?
A cash-out refinance replaces your first mortgage with a new, larger one and hands you the difference. If the new balance is 80% or less of the appraised value, conventional mortgage insurance is no longer required. The insurance is tied to leverage. Lower leverage, no insurance.
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.
The key word is appraised. Ordinary cancellation uses your original value. A refinance resets the value with a new appraisal. If your home has appreciated, that reset is the whole point. A home that rose in value can sit well under 80% even after you pull cash.
Lendmire’s cash-out refinance programs page lays out the conventional lane. The mechanics below apply across the wholesale programs Lendmire places files with.
Do You Need a Refinance at All?
Not always. Try cancellation first. Per the CFPB, you can ask your servicer to cancel when the balance is scheduled to reach 80% of the original value, or earlier with extra payments. The request has to be in writing. You certify there are no junior liens and show the value hasn’t dropped, often with an appraisal. Servicers must end it automatically at 78%.
Some servicers also allow removal on current value under their own standards, so ask yours.
Here’s the catch. A refinance can cost more than the insurance it removes. A full appraisal, new closing costs and cash-out pricing adjustments all apply. If you don’t need cash and you’re close to 80%, cancellation usually wins. Skip the refinance.
| Your situation | Likely path |
|---|---|
| Near 80% of original value, no cash needed | Request cancellation |
| Home has appreciated, want insurance gone | Refinance on a new appraisal |
| Need cash and want insurance gone | Cash-out at 80% LTV or less |
| FHA loan, want out of FHA insurance | Refinance into conventional |
| Existing VA loan | VA IRRRL (no monthly insurance) |
How Is the Loan Underwritten, Step by Step?
On these files, appraised value and credit score drive nearly every outcome. Here’s the sequence.
1. Identify the insurance type. Conventional borrower-paid, lender-paid, FHA, or a VA funding fee. Each exits differently.
2. Test simple cancellation. If it works, you may not need a new loan.
3. Estimate current value. The new loan must cover the payoff, any financed closing costs and the cash you take. Add those up against value.
4. Run the file. Automated underwriting reviews credit, income, assets and the property. The wholesale conventional programs start at a 620 decision score, subject to lender guidelines, with a total ratio ceiling of 50% on most files.
5. Appraise. A full appraisal is the norm. It sets the LTV that decides whether insurance drops.
6. Price and close. A cash-out pricing adjustment tied to credit score and LTV applies, per Fannie Mae’s Selling Guide. The old loan is paid off and its insurance policy ends.
7. Compare break-even. Monthly insurance saved versus the extra costs and the larger balance. You’ll see the actual terms on your Loan Estimate and Closing Disclosure.
Financed costs count toward LTV. Borrowers often miss this. Ask for cash and roll in closing costs, and the number creeps past 80%.
What Are the Cash-Out Limits That Decide the Outcome?
For a conventional cash-out, the Fannie Mae Eligibility Matrix sets 80% LTV on a one-unit primary residence and 75% on two- to four-unit principal residences. Occupancy sets the leverage, and a cash-out can be written on a primary residence, a second home or an investment property. Second homes and investment property are capped at 75%.
Two seasoning rules apply. The first mortgage being paid off must be at least 12 months old, measured note date to note date. At least one borrower must also have been on title for six months, per Fannie Mae’s seasoning announcement. Exceptions exist for delayed financing, inheritance and legal awards.
Note the ceiling and the insurance line are the same line. A cash-out at 80% or less carries no conventional mortgage insurance. Push higher and you’re outside the conventional cash-out box. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
In Texas, a cash-out on a homestead is capped at 80% of the home’s value by the state constitution, and the wholesale no-MI lane below is not written there.
Is There a Way to Drop Insurance at Higher Leverage?
Yes, narrowly. Mortgage insurance is required above 80% LTV on the agency path, with one exception: a wholesale cash-out lane that reaches 89.99% LTV with no mortgage insurance. It needs a 680 score, a 50% ratio, a 30-year fixed, a primary residence, a conforming balance and its own six months of seasoning, subject to lender guidelines and full file review.
Not every borrower fits. Not every state is covered. Lendmire is licensed for consumer lending in 16 states, and the lane’s availability depends on the wholesale lender and the property. A broker checks this before you pay for an appraisal.
What About FHA and VA Loans?
FHA. An FHA Streamline is built for existing FHA loans with limited credit review and a net tangible benefit test. It stays in FHA, so it does not drop mortgage insurance. HUD’s streamline page also notes closing costs can’t be rolled into the new streamline amount. FHA insurance doesn’t follow the 80% cancellation rules either. Fannie Mae notes that removing it may involve refinancing. So the usual exit is a cash-out or rate-and-term refinance into a conventional loan, with enough equity to land at or under 80%.
VA. VA loans have no monthly mortgage insurance, only a one-time funding fee. The IRRRL is for existing VA loans, with a 0.5% funding fee unless exempt, no VA appraisal and a net tangible benefit test. It can’t take cash out. A veteran with a conventional or FHA loan can refinance into a VA-backed loan, as VA News confirms. That ends the old insurance too.
How Do Banks, Credit Unions and Wholesale Lenders Differ?
All of them follow the same investor rules on the core math. The 80% cap, the seasoning and the appraisal don’t change by storefront. What differs is overlays: a higher credit floor, tighter documentation, a narrower property list.
A single bank or credit union gives you its menu. A broker shops several wholesale lenders and matches the scenario to the program. The right fit depends on your property type, credit profile, leverage need and documentation. Lenders that write the no-MI lane, for example, are a short list, and which ones fit depends on the file.
Where the General Rule Breaks
- Equity under 20% after cash-out. Insurance stays, or the loan falls outside the cap.
- Lender-paid MI. Its cost is built into the rate and can’t be cancelled. A refinance is the exit.
- Second liens. Paying off a non-purchase-money second can count as cash-out. A purchase-money second can be paid in a limited cash-out.
- Limited cash-out up to 95%. A rate-and-term refinance reaches 95% LTV on a one-unit primary home (97% in some agency-owned or first-time-buyer cases). Insurance is still required above 80%, with the no-MI lane as the exception. Cash back is a small capped amount.
- Listed for sale. A home listed at disbursement isn’t eligible for delivery to the agency.
- Credit events. Agency waiting periods apply: four years from a chapter 7 discharge, seven from a foreclosure, four from a short sale or deed-in-lieu, shorter with documented extenuating circumstances.
When Is Cash-Out the Wrong Tool?
Picture a homeowner at 82% of current value on a conventional loan with no need for cash. Cancellation or a no-cash refinance does the job. Pulling extra cash pushes the LTV up and can bring the insurance back or break the cap.
Now picture a different homeowner, this one on an FHA loan with 30% equity who wants cash for a repair. Cash-out into a conventional loan at 80% or less can end the FHA insurance and fund the work. That’s the fit.
Ending insurance lowers the monthly cost, per the CFPB. But a larger balance, a new term and new closing costs push the other way. Run the break-even before committing.
Questions to Ask a Loan Officer
- Will the final LTV, with financed costs and cash out, land at or under 80%?
- What does my current loan’s age do to seasoning?
- Is my existing loan agency-owned, and does that matter for the program?
- Does a cancellation request make more sense first?
- What overlays does the lender add to the investor minimums?
- Does the no-MI lane apply to my state, balance and score?
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. Program details are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Key Terms Defined
PMI: Private mortgage insurance on a conventional loan, usually required above 80% LTV.
MIP: The mortgage insurance premium on an FHA loan, paid upfront and annually.
LTV: Loan-to-value, the loan balance divided by the appraised value.
Seasoning: The minimum time you’ve held the loan or title before a cash-out is allowed.
Limited cash-out refinance: A rate-and-term refinance that pays off the loan and costs with only incidental cash back.
Frequently Asked Questions
Does a cash-out refinance always remove mortgage insurance?
No. It removes conventional insurance only when the new loan is at or below 80% LTV, with the narrow wholesale no-MI lane as the exception at higher leverage. Financed closing costs and extra cash both raise the LTV. Run the final number before assuming it drops. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Can I just cancel PMI instead?
Often, yes. You can request cancellation at 80% of original value, and servicers must end it at 78%. You’ll need good payment history, no junior liens and proof the value hasn’t fallen. If you don’t need cash, this is usually cheaper than refinancing.
Does an FHA Streamline get rid of FHA mortgage insurance?
No. The streamline stays inside FHA and keeps the premium. Ending it usually means refinancing into a conventional loan with enough equity to avoid PMI.
How long must I own the home before a cash-out?
The loan being paid off must be at least 12 months old, and a borrower must be on title for six months, with exceptions for delayed financing, inheritance and legal awards. The no-MI lane has its own six-month seasoning.
Can I get cash out of a VA IRRRL?
No. The IRRRL is VA-to-VA with no cash back. A VA cash-out refinance is the separate route, and it can also move a conventional or FHA borrower into a VA loan.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s refinance programs page.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency 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. CFPB
2. Fannie Mae Selling Guide: Cash-Out Refinance Transactions
3. Fannie Mae Eligibility Matrix
6. Fannie Mae homeowner site – PMI
7. VA News – Refinance into a VA loan
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Banks That Offer a Cash-Out Refinance to Pay for Home Repairs · How to Qualify and Apply for a Cash-Out Refinance Leaving the Second Mortgage in Place · How to Qualify and Apply for a Cash-Out Refinance on Your Home
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.