The Quick Read: No. Private mortgage insurance (PMI) does not raise the limit on a conventional cash-out loan. On a one-unit home you live in, the ceiling is 80% of the home’s value, and it is a hard stop. Past that point you borrow less, wait, or move to a different structure.
Why Doesn’t PMI Lift the Cap?
PMI is a purchase-loan tool. On a purchase, a buyer can put down less than 20% and pay PMI to cover the gap. A conventional cash-out refinance doesn’t work that way.
The loan-to-value ratio (LTV) is the new loan divided by the appraised value. The agency rules set that ceiling for cash-out at 80% on a one-unit principal residence. Fannie Mae’s Eligibility Matrix lists maximum LTV by transaction type, and it has no “with mortgage insurance” column for cash-out. The higher tiers belong to purchases and to limited cash-out refinances. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
So the question “will PMI cover me up to 90%?” has a short answer. It won’t. For a conventional cash-out on your own home, 80% is where the program ends.
Freddie Mac publishes its own cash-out maximums, and they are comparable to Fannie’s. Check Freddie Mac Guide section 4203.1 for the exact table before you plan around a number.
This is also the folk answer that circulates online: “take too much cash and you’ll owe PMI.” It has the logic backwards. Too much cash doesn’t add PMI. It makes the loan ineligible as a conventional cash-out.
Which Cap Are You Above?
“The cap” means two different things. One is the LTV cap, which limits the loan against the home’s value. The other is the conforming loan limit, which caps the dollar size of a loan the agencies buy. Most confusion comes from mixing them up.
| Your situation | Agency cash-out? | PMI in play? | Next step |
|---|---|---|---|
| At or under 80% LTV (one unit, primary) | Yes, if other tests pass | Generally no | Proceed to the file |
| Over the LTV cap, conforming size | No | Not a fix | Borrow less or restructure |
| Over the conforming loan limit | No (non-conforming) | Depends on product | Different lender rules apply |
The third row is a boundary, not a PMI question. Above the conforming limit, each lender or investor sets its own rules. That is a separate topic and outside this article.
How Is the Cap Actually Measured?
Lenders run the same steps on every file. They are worth knowing, because small items push a file over.
The appraised value is the denominator. The new loan amount is the numerator. That amount includes the payoff of your current mortgage, the closing costs and any fees you finance. Every financed dollar counts toward the cap.
Rounding goes against you. Freddie Mac’s Guide says LTV is rounded up to the next whole number, so 94.01% becomes 95%. Apply that to the cap and a file a hair over 80% is simply over.
A second lien counts too. The cap also applies to combined loan-to-value (CLTV) and home-equity CLTV (HCLTV). A home equity line that stays in place counts toward the limit.
The transaction type is decided first. Fannie Mae treats a refinance as cash-out when it doesn’t meet the limited cash-out definition. Its cash-out policy also sets out the delayed financing exception for recent cash purchases. Limited cash-out is a different product with different LTV rules.
A Quick Scenario in Percentages
Say you own a one-unit primary home. You owe about 62% of its appraised value. You want cash for a renovation, and the new loan would need to reach 84% of value once closing costs are financed.
That is over the cap. Nothing about PMI changes the answer. Your real choices are to take less cash, pay some closing costs out of pocket so the loan stays at 80%, or wait for the value or your balance to move. Because the lender rounds up, aim for a margin rather than a landing right on the line.
What Changes by Occupancy and Property Type?
Occupancy sets the ceiling. Across the wholesale programs I place files with, conventional cash-out is 80% LTV on a one-unit principal residence. It is 75% on two- to four-unit principal residences, second homes and investment property. If your title question involves a rental, that one sentence is the answer: occupancy decides the leverage. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
A few other edges matter:
- Manufactured housing has its own lower limits.
- Community Seconds (certain assistance second liens) are not permitted with cash-out refinances.
- High LTV Refinance is suspended, so don’t plan around it.
The same matrix covers all three points.
Which Tests Can Block a Cash-Out Entirely?
Missing the cap by a point shrinks your loan. Missing a seasoning test can kill the cash-out altogether.
Seasoning is the waiting period a lender requires before you can refinance. Two tests apply on the conventional programs I work with:
1. The first mortgage being paid off must be at least 12 months old, counted note date to note date. 2. At least one borrower must have been on title for 6 months, with exceptions for delayed financing, inheritance and legal awards.
So “I’ll refinance right after buying” doesn’t work as a cash-out. It may still work as another transaction type, which is where the next section comes in.
Credit and ratios matter too. The wholesale conventional programs generally start at a 620 decision score. The automated underwriting finding governs most files, with a total debt-to-income ceiling of 50%. Fannie Mae’s matrix also adds reserve requirements to cash-out files above a 45% ratio. Everything here is subject to lender guidelines and full file review.
Cash-out files also carry loan-level price adjustments, which are pricing adjustments that depend on LTV and credit score. Higher LTV and lower scores raise the cost. That is how the agency program prices risk instead of through PMI.
Where Does PMI Actually Belong?
PMI shows up when a loan sits above 80% LTV. For refinances, that means the limited cash-out lane, which is often called a rate-and-term refinance. The new loan pays off your existing first mortgage and closing costs, and you get only incidental cash back.
Here is what the wholesale programs I use allow:
- 95% LTV on a one-unit principal residence.
- 97% LTV where the existing loan is agency-owned and the first-time-buyer program allows it.
- Mortgage insurance above 80%. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Fannie Mae’s limited cash-out section adds conditions to the 95.01% to 97% tier. It is fixed-rate only, for a one-unit principal residence, and every borrower must occupy the home. High-balance and adjustable-rate loans are excluded.
The trade-off is simple. Limited cash-out reaches high LTV, but you can’t take meaningful cash. A cash-out refinance gives you the cash, but stops at 80%. Neither lets you do both.
What If You Want More Than the Cap Allows?
You have a few honest paths. None is free of trade-offs.
- Take less cash. Shrinking the draw is the cleanest way back under the line.
- Pay closing costs in cash. Financed costs count toward the cap, so paying them out of pocket keeps the loan smaller.
- Wait. Paying down the balance or a higher appraisal moves your LTV without changing the loan.
- Use a separate second lien or line. Keep in mind that CLTV limits can still apply, and a line counts toward them.
- Switch the structure. A limited cash-out refinance, or a different purchase-money approach, may fit if cash isn’t the main goal.
There is also a wholesale lane worth knowing about. It reaches 89.99% LTV with no mortgage insurance. It requires a 680 score, a 50% ratio, a thirty-year fixed rate, a primary residence and a conforming balance, plus its own six months of seasoning. In Texas, a cash-out on the homestead is capped by the state constitution at the agency figure, so that lane isn’t written there. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Pricing and terms on that lane differ from the agency cash-out, so compare the Loan Estimates side by side. Lendmire’s piece Can a Conventional Cash-Out Go Above the Cap Without Mortgage Insurance? walks through who it fits.
If a home equity line is your other option, see Lendmire’s comparison of a conventional cash-out against a home equity line. For a look at how the programs fit together, Lendmire’s cash-out refinance programs page lays out the main lanes.
What If You Already Pay PMI?
A refinance resets the clock. Your new loan has its own baseline for cancellation, so a fresh loan at or under 80% LTV isn’t carrying PMI at all, while a limited cash-out above 80% is. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Federal law sets the cancellation rules, and the CFPB’s PMI guidance is the plain-language source. You can ask to cancel when your balance reaches 80% of the home’s original value. The request must be in writing. You need a good payment history, a certification that you have no junior liens, and evidence the value hasn’t dropped.
The servicer must end PMI automatically at 78%. It must also end it the month after the loan’s amortization midpoint. That is the real answer to “is PMI forever?” It isn’t. How “original value” is measured after a refinance depends on the details, so check the CFPB page or your servicer.
Key Terms Defined
LTV (loan-to-value): The new loan amount divided by the home’s appraised value.
CLTV / HCLTV: LTV that also counts any second lien or home equity line, including the full line amount for HCLTV.
PMI (private mortgage insurance): Insurance on a conventional loan above 80% LTV that protects the lender, not you. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Conforming limit: The maximum loan size the agencies will buy. Above it, a loan is non-conforming. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Limited cash-out refinance: A refinance that pays off your loan and costs, with only incidental cash back.
Seasoning: The waiting period before you can refinance or take cash out.
LLPA: A loan-level price adjustment that raises or lowers cost based on LTV and credit score.
Common Misconceptions
“I’ll pay PMI to borrow up to 90%.” Not on a conventional cash-out. The cap is 80% on a one-unit principal residence, and PMI doesn’t extend it.
“Cash-out and limited cash-out are the same.” They are separate transaction types with different LTV caps.
“The cap only applies to the first mortgage.” CLTV and HCLTV are capped too, so a line you keep counts.
“A second home gets the same 80%.” It gets 75%.
“PMI is forever.” It can be cancelled and is terminated under federal law.
Frequently Asked Questions
Can I get a conventional cash-out refinance at 90% LTV with PMI?
Not on the agency cash-out program. The cap is 80% on a one-unit principal residence, and 75% for two- to four-unit homes, second homes and investment property. For 90%, you’d be looking at a different product, such as a separate wholesale lane with its own conditions. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Will taking more cash out trigger PMI?
No. Past the cap the loan simply isn’t eligible as a conventional cash-out. PMI belongs to limited cash-out and purchase loans above 80% LTV. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Do closing costs count toward the cap?
Yes. Anything you finance goes into the new loan amount, and the lender rounds LTV up to the next whole number. Paying costs in cash can keep you under the line.
Does a home equity line affect my cash-out limit?
Yes, when it stays in place. The cap also applies to combined LTV, so the line’s balance or amount counts toward the total. Confirm the exact treatment with your lender.
What if my new loan would exceed the conforming limit?
Then it’s a non-conforming loan, and each lender sets its own rules. The agency matrix no longer governs it. Loan limits vary by county, so check yours before you plan the amount.
If You Are Weighing Your Options
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 figures here are subject to lender guidelines and full file review, and none of this is a commitment to lend.
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.
For the program’s current guidelines, see conventional loan programs.
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References
1. Fannie Mae Eligibility Matrix
2. Freddie Mac Guide Section 4203.1
3. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
4. Fannie Mae Selling Guide B2-1.3-02, Limited Cash-Out Refinance Transactions
5. CFPB: When can I remove private mortgage insurance (PMI) from my loan?
This article is part of Lendmire’s Conventional Loans series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: How Much Cash a Conventional Cash-Out Releases After Payoff and Costs · How Much Equity a Conventional Cash-Out Refinance Releases · Conventional Cash-Out Refinance Credit Requirements by Occupancy and LTV
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.