The Quick Read: It depends on how much equity you have. Many banks and non-bank lenders offer a cash-out refinance, and the new loan can leave PMI behind. That only works when the new loan, including any cash you take, lands at or below roughly 80% of the home’s appraised value. Above that line, PMI generally comes back, with one wholesale exception covered below.
Lendmire does not rank or name banks. Any lender that sells loans to Fannie Mae or Freddie Mac applies the same agency rules. What changes from lender to lender is pricing, overlays, and how well the program fits your file. The best fit depends on your property, credit profile, and how much cash you need.
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.
What Does a Cash-Out Refinance Do to PMI?
A cash-out refinance replaces your old loan with a new, larger one. The old PMI policy ends when the old loan is paid off. Whether the new loan needs PMI depends on one test: the new loan balance divided by the new appraised value.
Mortgage insurance is required above 80% loan-to-value (LTV) on the agency path, except in one wholesale no-MI cash-out lane covered later. Fannie Mae’s eligibility summary says the portion of a loan above 80% must be covered by mortgage insurance. A standard conventional cash-out on a one-unit primary home tops out at 80% LTV. So a standard cash-out generally carries no PMI by design.
That is the whole mechanic. The cap that limits your cash is the same line that keeps PMI off.
Key Terms Defined
PMI (private mortgage insurance): Insurance on a conventional loan that protects the lender when you put down less than 20%. You pay for it, but it protects the lender.
LTV (loan-to-value): Your loan balance divided by your home’s appraised value. A $0.80 loan on each $1.00 of value is 80% LTV. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Cash-out refinance: A new loan larger than what you owe. It pays off the old loan, and you keep the difference as cash.
Rate-and-term (limited cash-out) refinance: A new loan that pays off the old first mortgage and closing costs, with only a small, capped amount of cash back.
Seasoning: The waiting period a loan or ownership must have aged before you can refinance it.
Loan-level price adjustment (LLPA): An extra pricing charge the agencies apply based on loan features such as cash-out. Lenders usually fold it into your terms rather than showing it as a separate line.
Do You Even Need a Refinance to Drop PMI?
Often, no. This is the first test, and many borrowers skip it.
Under the Homeowners Protection Act, you can ask your servicer to cancel PMI once the balance reaches 80% of the home’s original value. The servicer must end it automatically at 78%. Fannie Mae’s consumer page adds the conditions: a clean recent payment history, with no payment 30 or more days late in the past year and none 60 or more days late in the past two. The federal consumer-finance regulator notes you must also certify there are no junior liens, such as a second mortgage.
Fannie Mae and Freddie Mac also have current-value routes. If your home has gained value, the servicer may cancel based on today’s value rather than the original. Those routes use seasoning tiers, a lower LTV threshold for newer loans and a higher one for older loans. They often require a new appraisal. Ask your servicer for its exact requirements.
Cancellation usually costs a valuation fee. A refinance carries full closing costs and an appraisal. If cancellation works for you, it is usually the cheaper route.
So a cash-out refinance makes sense for PMI only when you also want the cash, or when cancellation is blocked. Common blockers include a second lien, a recent late payment, or a loan type with no cancellation right.
How Is the Loan Underwritten, Step by Step?
Here is how a cash-out file moves through the wholesale programs Lendmire places files with.
1. Confirm the loan you have. Borrower-paid PMI on a conventional loan is the scenario here. FHA mortgage insurance and lender-paid mortgage insurance work differently (see the edge cases below).
2. Test whether cancellation works first. If the balance is near 80% of original value, a servicer request may do the job.
3. Check seasoning. The first mortgage being paid off must be at least 12 months old, measured from the old note date to the new note date. A borrower must also have been on title for 6 months, with exceptions for delayed financing, inheritance, and legal awards. Fannie Mae’s cash-out guide sets out the 12-month rule. One gotcha: a recent refinance resets the clock, because the loan being paid off must itself be 12 months old.
4. Run credit and ratios. The wholesale conventional programs start at a 620 decision score. The automated underwriting finding governs most files, with a total debt-to-income ceiling of 50%. Manually underwritten loans use 36% or 45%, with reserve and score factors. The same Fannie Mae guide calls for reserves when the ratio runs high on automated files.
5. Order the appraisal. LTV is measured on the new appraised value. This is the step that decides the PMI question. A low appraisal raises LTV and can sink the plan.
6. Price the loan. Cash-out loans carry an LLPA that rate-and-term loans do not, so cash-out pricing generally runs higher. Compare Loan Estimates line by line.
7. Close and confirm. The old servicer is paid, the old PMI ends, and the Loan Estimate and Closing Disclosure should show no mortgage insurance line on the new loan.
How Much Cash Can You Actually Take?
Less than most people expect. Run the math in percentages.
On a one-unit primary residence, the new loan can reach 80% of appraised value. That new loan must cover three things: your payoff, any closing costs you finance, and the cash you want. Whatever remains under the 80% line is your cash.
Picture a home appraised well above what you owe, with a balance near 60% of value. The gap between 60% and 80% is roughly 20% of the home’s value. Financed closing costs come out of that gap first. What’s left is your cash. Now picture a homeowner whose balance already sits near 78%. There is almost nothing to take, and financing costs could push the loan over the line.
Two- to four-unit primary residences, second homes, and investment properties cap at 75% on a cash-out. Occupancy sets the leverage, so the cash available shrinks on those property types. A second lien also counts: a home equity line or second mortgage that stays in place pushes your combined ratio up and eats the room for cash.
In Texas, a cash-out on a homestead is capped at 80% of the home’s value by the state constitution.
What If You Are Slightly Over the Line?
You have three levers. None is free.
- Shrink the cash-out. Take less cash, or none, and the loan fits under 80%. This works when your real goal is dropping PMI.
- Bring cash to closing. Paying down the balance at closing moves the ratio. You trade liquidity for a lower monthly cost.
- Pay costs out of pocket. Financing closing costs adds to the balance. Paying them in cash keeps the loan smaller.
If none of these fit, the right move may be to keep the loan and let normal paydown or appreciation do the work.
The Wholesale Exception: Cash-Out With No Mortgage Insurance Above 80%
One lane breaks the 80% rule. A wholesale cash-out lane reaches 89.99% LTV with no mortgage insurance. It requires a 680 score and a 50% ratio on a thirty-year fixed rate. It covers a primary residence with a conforming balance, and it carries its own six months of seasoning. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
It is not available everywhere, and it is not written in Texas. It also comes with its own pricing, so the absence of a PMI line does not mean a lower cost. Whether it fits depends on your file. A broker that shops multiple wholesale lenders can tell you which lenders write it and which do not.
Where the General Rule Breaks
Several situations bend the “cash-out ends PMI” story.
Rate-and-term instead of cash-out. A limited cash-out refinance pays off the first mortgage, closing costs, and any purchase-money second. Cash back is a small, capped amount. Leverage runs to 95% on a one-unit primary residence, but mortgage insurance applies above 80%. So if you have 20% equity and no need for cash, rate-and-term avoids the cash-out pricing adjustment. Fannie Mae’s rule on limited cash-out transactions treats a non-purchase-money second lien as making the loan cash-out.
FHA loans. FHA mortgage insurance follows different rules. HUD says monthly premium cancellation applies only to older cases, those with a case number assigned before June 3, 2013. For later cases, insurance generally ends only when the loan is paid off. Refinancing into a conventional loan is the usual exit. A cash-out conventional loan can do that if your equity clears the 80% line.
Lender-paid mortgage insurance. With this structure, the lender covers the premium and builds the cost into your loan terms. There is generally no borrower cancellation right, so refinancing is the usual exit. Check your loan documents.
Delayed financing. A buyer who paid cash can take cash out soon after purchase under delayed financing rules. It is still priced as cash-out.
Second liens and HELOCs. The cap applies to total debt. A second mortgage can push your combined ratio over the limit and block PMI cancellation by the servicer too.
Multi-unit and other occupancies. Property type changes the math. A two- to four-unit home, a second home, or an investment property each follows its own lower cap, so confirm the figure for your property before you plan around the cash.
Is It Worth It After Closing Costs?
Run a break-even. Divide your total closing costs by your monthly savings. The result is how many months you must stay in the home before the refinance pays for itself.
Three things make the answer less obvious than it looks:
- The payment may not fall. A refinance changes your term, balance, and pricing, not just PMI. Cash taken out raises the balance.
- Financed costs cost twice. Rolling closing costs into the loan raises the balance and the interest paid over time.
- Equity shrinks. You keep at least 20% equity on a standard cash-out, but you own less of the house than before.
Lendmire’s conventional program sheet lists typical annual mortgage insurance premiums of 0.58% to 1.86% of the balance. That range gives you a sense of what ending PMI may save, but your actual premium depends on your credit and leverage. Check your own statement.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
When Is a Cash-Out the Wrong Tool?
Skip it in these cases:
- You don’t need cash. If PMI is your only target, cancellation or rate-and-term usually beats cash-out pricing.
- Cancellation is close. If you are months from 80% of original value, waiting may cost less than closing costs.
- You’re moving soon. A short stay may not reach break-even.
- You recently refinanced. The 12-month clock may block you.
- Your appraisal is a coin flip. If a modest value miss pushes you over 80%, the PMI goal fails after you’ve paid for the appraisal.
A cash-out can still make sense when you have a real use for the money and your equity clears the line. In that case, ending PMI is a bonus, not the reason.
How Do You Choose Among Banks, Credit Unions, and Non-Bank Lenders?
The agency rules are the same everywhere. The differences sit in pricing, overlays, and service. Some lenders add stricter credit floors or reserve rules on top of the agency minimums. Others hold loans on their own books and set their own terms.
Ask each one the same questions:
- Does this quote show mortgage insurance on the new loan, yes or no?
- How is cash-out pricing reflected in my terms?
- What overlays do you add to the agency rules?
- What is the appraisal plan, and what happens if the value comes in low?
- Which costs are financed, and which are paid at closing?
A broker can run that comparison across multiple wholesale lenders at once. The best lender for your situation depends on your property type, credit profile, and how much cash you need. Lendmire’s cash-out refinance programs page lays out how the options work.
What Should You Gather Before You Apply?
Prepare these items, and the deal works cleaner:
- Your latest mortgage statement, with the PMI line visible
- Your note date, so the 12-month clock is clear
- Pay stubs, tax returns, and bank statements, as the lender requests
- A list of any second liens or HELOCs
- Your target cash amount and what it is for
Every program figure here is subject to lender guidelines and full file review, and none of it is a commitment to lend.
Frequently Asked Questions
Does a cash-out refinance automatically remove PMI?
Only if the new loan is at or below the agency leverage cap, which is 80% of appraised value on a one-unit primary home. The old policy ends at payoff either way. Whether the new loan carries PMI depends on the new LTV, and a low appraisal can bring it back.
Can I get a cash-out refinance if I currently pay PMI?
Yes. Existing PMI does not block a cash-out. The loan being paid off must be at least 12 months old, and the new loan must fit the leverage cap for your property type. Credit, ratios, and reserves are reviewed as on any conventional file.
Is it cheaper to cancel PMI than to refinance?
Often, yes. Cancellation at 80% of original value may cost only a valuation fee, while a refinance carries closing costs and an appraisal. Cancellation requires a good payment history and no second liens. Compare both routes before applying.
Can I leave FHA mortgage insurance behind with a cash-out?
Often, yes, if your equity supports a conventional loan. For FHA cases from June 3, 2013 onward, insurance generally ends only when the loan is paid off. A conventional cash-out at or below the leverage cap removes it, though it needs a qualifying score and ratios.
Which banks offer this?
Any lender that sells to Fannie Mae or Freddie Mac can write a conventional cash-out, so the rules are shared. The best lender for you depends on your credit, property, and cash needs. A broker shopping multiple wholesale lenders can match the file to the program.
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 brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
For the program’s current guidelines, see conventional loan programs.
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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. Freddie Mac
2. Fannie Mae Selling Guide eligibility summary
3. Fannie Mae consumer page on private mortgage insurance
4. CFPB
5. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
6. Fannie Mae Selling Guide B2-1.3-02, Limited Cash-Out Refinance Transactions
7. HUD, FHA mortgage insurance premiums
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How a Conventional Cash-Out Refinance Resets Your Loan Term · Best Cash-Out Refinance Program to Get Rid of PMI on the Current Loan · How to Avoid PMI 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
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.