The Quick Read: Usually no. A standard conventional cash-out refinance on a primary residence is capped at 80% loan-to-value, and mortgage insurance is only required above 80%. The cap and the trigger sit on the same line, so a compliant cash-out loan generally never enters the PMI zone. Where PMI does show up is on high-leverage purchase and rate-and-term loans, and on one narrow wholesale exception covered below.
Why the Cap and the PMI Trigger Line Up
The two rules are linked by design. Fannie Mae’s Selling Guide requires mortgage insurance on a conventional first mortgage with an LTV above 80%, unless the lender supplies another charter-compliant form of credit enhancement. Freddie Mac’s Guide sets the same 80% line. The FHFA explains why: when the two agencies buy a loan above 80% of the property’s value, their charters require credit enhancement, and mortgage insurance is the usual form.
Now look at the other side. Across the wholesale programs Lendmire places files with, a conventional cash-out refinance tops out at 80% LTV on a one-unit primary residence. Two- to four-unit principal residences, second homes and investment property top out at 75%. The Fannie Mae Eligibility Matrix shows the same tiers for a principal residence. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
So the cash-out loan stops at the exact point where insurance would begin. No overlap. That’s the whole answer, and it’s why the common belief that “cash-out always means PMI” is wrong.
Where PMI Actually Applies (Limited Cash-Out and Purchase)
PMI questions belong to a different loan type. A rate-and-term refinance, also called a limited cash-out refinance, can go much higher. On a one-unit principal residence the wholesale programs reach 95% LTV, and 97% where the existing loan is agency-owned and the first-time-buyer program allows it. The new loan pays off the existing first mortgage, closing costs and any purchase-money second lien, with only incidental cash back. Above 80%, mortgage insurance applies. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Purchase loans work the same way. A first-time buyer on a one-unit primary residence can reach 97% LTV with a fixed rate. Standard purchases reach 95%. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Many homeowners say “cash-out” when they mean “refinance with a little cash back.” If your plan is to pay off the old loan and pocket a modest amount, ask which category the loan falls into. That one label decides whether insurance is in the picture.
The Narrow Exception: A Wholesale Lane Above 80%
One lane breaks the simple pattern. Some wholesale programs reach 89.99% LTV on a cash-out with no mortgage insurance. It’s tight: a 680 score, a 50% total ratio, a thirty-year fixed rate, a primary residence, a conforming balance, and its own six months of seasoning. It isn’t offered in Texas, where the state constitution caps a homestead cash-out at the agency figure. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Treat this as an option to ask about, not a promise. Eligibility depends on lender guidelines and a full file review. It also isn’t PMI-free in a free-lunch sense; the lender builds the cost of that structure into the loan’s pricing, which is a conversation for the Loan Estimate.
How the Math Works on Your Own Loan
Run the test in four steps.
1. Find the value. For a refinance, the value can come from an appraisal, an automated valuation or another acceptable method.
2. Add up what the new loan must cover. That’s the payoff of your current mortgage, closing costs and any cash you want.
3. Divide by the value. New loan amount divided by value gives the LTV.
4. Compare to the cap. Stay at or below 80% on a one-unit primary home (75% on two to four units) and no insurance is required.
Here’s the catch: closing costs come out of the same 80%. Your cash is the value limit minus payoff, fees and prepaid items. A low appraisal shrinks the room, and it can shrink the cash to nothing. A homeowner who counted on a certain figure can find the loan simply can’t reach it.
Picture a homeowner with a modest remaining balance. A small balance helps only because it leaves more space under the cap. It doesn’t lift the cap itself.
Now picture the same homeowner after a soft appraisal. The cap stays at 80%, but the value it applies to drops. The result is less cash, not a PMI bill. The limit simply tightens.
Who Qualifies for the Cash-Out Lane
Eligibility goes beyond the LTV line. Based on the wholesale programs Lendmire works with:
- Seasoning on the old loan. The first mortgage being paid off must be at least 12 months old, measured note date to note date. This doesn’t apply to subordinate liens or co-owner buyouts.
- Time on title. At least one borrower must have been on title for six months, with exceptions for delayed financing, inheritance and legal awards (divorce or separation).
- Credit and ratios. Wholesale conventional programs generally start at a 620 decision score, with the automated finding governing most files and a 50% total-ratio ceiling. Manually underwritten loans use tighter ratios of 36% or 45%.
- Reserves. Reserves may be required when the debt-to-income ratio runs high. Fannie Mae’s cash-out guidance sets six months of reserves on automated files above a 45% DTI.
- Listing status. A home listed for sale must come off the market by the disbursement date.
Eligibility review depends on the full file. Nothing here is a commitment to lend. Homeowners comparing structures can look at Lendmire’s cash-out refinance programs to see how the equity limits differ.
Key Terms Defined
PMI (private mortgage insurance): Insurance on a conventional loan that protects the lender, paid by the borrower, required above 80% LTV. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
LTV (loan-to-value): The new loan amount divided by the home’s value.
Cash-out refinance: A new first mortgage that pays off the old one and gives you extra cash from your equity.
Limited cash-out (rate-and-term) refinance: A refinance that pays off the old loan and costs, with only incidental cash back.
Seasoning: The minimum time a loan or ownership must exist before you can refinance.
What Can Change the Answer
| Situation | PMI outcome |
|---|---|
| Cash-out at or below 80% (1 unit) | No PMI required |
| Cash-out on 2–4 units, second home | Lower cap, 75%; no PMI at the cap |
| Limited cash-out above 80% | PMI required |
| Wholesale no-MI lane to 89.99% | No PMI; strict score and ratio terms |
| Appraisal comes in low | Less cash available; PMI not triggered |
A few more edge cases:
- Credit enhancement alternatives. The Selling Guide allows “another charter-compliant form of credit enhancement” in place of a policy. That exists, but a borrower shouldn’t count on it.
- HomeReady. It’s limited to purchase and limited cash-out refinances, so a true cash-out isn’t a HomeReady option.
- Existing PMI. Paying off the old loan ends that loan’s insurance. If the new loan sits at or below 80%, none restarts.
- High-balance and manufactured homes. Caps can be lower for some property types. Those depend on the lender’s matrix.
Common Myths
“I can borrow 90% and just pay PMI.” On a standard cash-out, no. The cap is 80%, not a higher tier with insurance.
“A big original down payment means no PMI.” The test is the LTV on the new loan, not what you put down years ago.
“PMI is forever.” Not on conventional loans. Under the Homeowners Protection Act, as the CFPB explains, you can request cancellation at 80% of the original value, and termination is automatic at 78%. Cancellation requires good payment history, no subordinate liens and no decline in value.
“PMI and MIP are the same.” PMI belongs to conventional loans. FHA charges its own mortgage insurance premium under separate rules, and VA uses a funding fee. Those are different programs.
If You Want More Cash Than 80% Allows
If the cap blocks the amount you need, you have choices:
- Take less cash. The simplest fix.
- Pair a second lien or HELOC with your first mortgage. Watch the combined LTV, because it counts toward the limits.
- Look at the no-MI wholesale lane if you fit its score, ratio and property rules.
- Choose a different structure. Keeping the existing loan may beat refinancing, which is the real trade-off. A cash-out resets the loan and runs all costs through the new balance.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
If you hold an FHA loan and want to move to conventional, see Lendmire’s piece Does Moving From FHA to a Conventional Cash-Out Refinance Need PMI?. And if you’re curious how high a conventional cash-out can reach, Lendmire’s explainer covers the maximum LTV for a conventional cash-out refinance.
Frequently Asked Questions
Does a cash-out refinance always add PMI?
No. A standard conventional cash-out is capped at 80% LTV on a one-unit primary residence, and insurance only applies above 80%. The cap prevents the loan from reaching that zone, so PMI isn’t part of the usual cash-out structure. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Can a low appraisal trigger PMI on a cash-out?
Not on a standard cash-out. A low value shrinks the loan the 80% cap allows, so you get less cash instead of an insurance premium. If the shortfall pushes the loan above the cap, the lender reduces the amount rather than adding PMI.
Does the PMI on my current loan carry over?
No. Paying off the old loan ends its insurance. If your new loan lands at or below 80%, no insurance starts. If a different structure put you above 80%, the cancellation clock would restart on the new loan.
Is the rule different for a second home or a rental?
Yes, but briefly: occupancy decides the leverage. Second homes and investment property have a 75% cap on cash-out in these programs, which is below the PMI line, so the same logic holds.
Can I remove PMI later if I end up with it?
Usually. On conventional loans you can ask for cancellation at 80% of the original value, and the servicer must end it automatically at 78%. The servicer can require good payment history, no junior liens and proof that the value hasn’t dropped.
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.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. 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 Selling Guide B7-1-01, Provision of Mortgage Insurance
2. Freddie Mac Guide Section 4701.1, Mortgage insurance
3. FHFA, PMIERS
4. Fannie Mae Eligibility Matrix
5. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
6. CFPB, When can I remove PMI?
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 to Prepare a Conventional Cash-Out Refinance for a Clean Close · 6 Myths About the Cost of a Conventional Cash-Out Refinance · Conventional Cash-Out Refinance Electronic Verification Rules
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.