The Quick Read: A conventional cash-out refinance can end PMI, but only when the new loan lands at or below 80% of the appraised value on a one-unit home you live in. The new loan pays off the old one, so the old PMI policy ends at payoff. Because the new balance includes the cash you take and any financed costs, the equity math decides whether PMI stays gone. Program figures here are subject to lender guidelines and full file review, and nothing is a commitment to lend.
Key Takeaways
- The new loan size, not the act of refinancing, decides whether PMI returns.
- Agency cash-out leverage tops out at 80% on a one-unit principal residence and 75% on two- to four-unit homes.
- Two clocks apply: the loan you are paying off must be at least 12 months old, and a borrower must have been on title for 6 months.
- If you do not need the cash, cancelling PMI without a new loan is often the cheaper route.
Does a Cash-Out Refinance Really Make PMI Disappear?
Usually, yes, when the numbers fit. PMI follows leverage. Mortgage insurance is required above 80% loan-to-value on the agency path, with one exception: a wholesale no-MI cash-out lane covered below. Agency cash-out caps for a one-unit principal residence sit at 80%, so a standard cash-out lands right at the line where PMI is no longer required.
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: 7.24% as of October 29, 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.
Here is the catch. You are not just replacing a balance. The new loan equals the payoff of your old mortgage, plus the cash you take, plus any closing costs you roll in. Measure that total against the new appraisal. If it exceeds 80%, it is not a standard cash-out, and you have to bring cash to closing or take less.
Lendmire’s cash-out refinance programs page lays out the program options. The mechanics below apply across the wholesale programs Lendmire places files with, as a broker arranging loans through wholesale lenders.
How the Loan Is Sized, Step by Step
Think of it as subtraction from a ceiling.
1. Start with the appraisal. Leverage is measured against the new appraised value, so a low appraisal shrinks everything below it.
2. Apply the cap. Maximum loan equals appraised value times the applicable percentage: 80% for a one-unit principal residence.
3. Subtract the payoff. Your existing first mortgage, and any lien that must be paid, comes out first.
4. Subtract financed costs. Anything you roll into the balance eats into your cash.
5. What remains is your cash.
The cap counts every lien. Under the Fannie Mae Eligibility Matrix, the limit applies to loan-to-value, combined loan-to-value and home-equity combined loan-to-value. A HELOC or second mortgage that stays in place counts against your room.
Picture a homeowner with a one-unit primary residence whose existing loan is at roughly 70% of today’s appraised value. A cash-out to 80% leaves about ten points of the home’s value as available cash, before costs. Roll in financed closing costs and that cushion shrinks. If those costs push the total past 80%, the PMI-free outcome slips away. That is the financed-costs trap, and it catches people who plan to the exact percentage.
What Underwriters Check: The Requirements
| Requirement | What it means | What to prepare |
|---|---|---|
| Leverage | 80% max on one unit; 75% on 2-4 units | Recent mortgage statement |
| Occupancy | Sets the cap; the home need not be a primary residence | Occupancy plan |
| Loan age | Loan being paid off at least 12 months old | Original note date |
| Title time | One borrower on title 6 months | Deed or closing records |
| Credit | Wholesale programs start at a 620 score | Credit review |
| Ratios | Total ratio ceiling of 50% on automated findings | Income documents |
| Appraisal | Sets the denominator | Access to the home |
Occupancy sets the leverage. A cash-out is written on a primary residence, second home or investment property, and second homes and investment property carry the lower 75% cap.
Higher debt can add reserve requirements. Fannie Mae’s matrix notes that minimum reserves apply to automated cash-out files with debt ratios above 45%. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
The Two Clocks
Fannie Mae’s announcement SEL-2023-01 requires any existing first mortgage being paid off to be at least 12 months old, measured note date to note date. It also keeps the rule that a borrower be on title for at least six months. Freddie Mac’s Guide likewise requires at least one borrower on title for six months before the note date, and lists delayed financing as an exception path.
Recent buyers hit these clocks first. Exceptions exist for delayed financing after a cash purchase, inheritance and legal awards, but each has its own documentation.
The One Exception to the 80% Rule
Across the wholesale programs Lendmire places files with, one lane reaches 89.99% loan-to-value with no mortgage insurance. It requires a 680 score, a 50% ratio, a thirty-year fixed rate, a primary residence, a conforming balance and its own six months of seasoning. It is the single exception to the rule that mortgage insurance applies above 80%. Eligibility depends on lender guidelines, and the lane is not written in Texas.
Texas homestead cash-outs, known as Section 50(a)(6) loans, are capped at 80% of the home’s value by the state constitution.
Do You Need a Refinance to Drop PMI at All?
Often not. Honestly, this is the question to settle first, because a new loan resets your term and reprices the full balance.
| Route | New loan needed? | Key condition |
|---|---|---|
| Automatic termination | No | Balance reaches 78% of original value, payments current |
| Request at 80% | No | 80% of original value, no junior liens, value not declined |
| Current-value cancellation | No | Servicer valuation; seasoning tiers apply |
| Rate-and-term refinance | Yes | New loan at or below 80%, only incidental cash back |
| Cash-out refinance | Yes | New loan at or below 80%, you want real cash |
The Consumer Financial Protection Bureau explains that you can ask your servicer to cancel PMI when the balance is scheduled to reach 80% of original value, or earlier with extra payments. It lists two conditions for early cancellation: certify there are no junior liens, and show the value has not fallen below the original value, often with an appraisal. Ending PMI lowers your monthly costs.
Misconception worth clearing up: PMI does not drop automatically at 80%. You request it at 80%. Automatic termination comes at 78%.
Cancelling on Current Value
If your home has appreciated, a no-refinance path may work. Under Fannie Mae’s Servicing Guide, a one-unit principal residence or second home can be cancelled on current value when the loan-to-value is 75% or less with seasoning between two and five years, or 80% or less past five years. If the two-year minimum is waived because your improvements raised the value, the limit is 80%. The servicer verifies value with a valuation, at your expense. This applies to loans owned by Fannie Mae, so ask your servicer whose loan you have.
Fannie Mae has also moved to let servicers proactively contact borrowers who may qualify for current-value termination, per its Lender Letter LL-2026-07. It directs servicers, so asking yours directly is the practical step.
When Cash-Out Is the Wrong Tool
The call depends on why you want the money. If the goal is only to drop PMI, a cash-out is often the more expensive way to get there. Cash-out loans carry pricing adjustments based on leverage and credit score, which can offset the PMI savings. Fannie Mae’s Selling Guide applies those adjustments to cash-out transactions, and no dollar amounts are quoted here because they change.
Compare the options:
- Only want PMI gone, have equity: a rate-and-term (limited cash-out) refinance allows only incidental cash back. Fannie Mae permits the lesser of 2% of the new loan amount or $2,000; Freddie Mac, the greater of 1% of the new loan amount or $2,000. Lendmire’s piece on limited cash-out options walks through that lane.
- Slightly short of 80%: paying the balance down, or bringing cash to closing, can get a new loan under the line.
- Need real cash and want PMI gone: this is where cash-out earns its place.
- Want cash but not a new first mortgage: a second lien is an alternative, but a junior lien can block PMI cancellation on the original loan.
The flip point is simple. If you need the cash, cash-out can do both jobs. If you do not, you are paying interest on money you never wanted, on a freshly reset term.
Edge Cases Where the Rule Bends
- Free-and-clear homes. A new loan on a home with no mortgage is still cash-out under Freddie Mac’s Guide. It is not a cheap no-cash-out refinance.
- Listed for sale. Older Fannie Mae guide text makes a loan ineligible for delivery if the home is listed when the loan disburses. Confirm current policy with your loan officer.
- Other ineligible items. Older guide versions list a temporary buydown, HomeStyle Energy loans and payoff of an installment land contract as ineligible for cash-out.
- Renovation loans. Freddie Mac treats certain renovation loans as no cash-out when proceeds fund only eligible improvements.
- PACE obligations. A PACE energy lien with first-lien priority generally must be paid off with the proceeds.
- FHA loans. The Homeowners Protection Act does not cover FHA mortgage insurance. An FHA borrower often refinances into a conventional loan to shed it, subject to equity and credit.
- Assumed loans. If a new borrower assumed the loan, the servicer needs a 24-month payment history before agreeing to termination.
What the Decision Looks Like in Practice
Start with the appraisal, because it is the swing variable. Then work out whether your total new balance, cash and costs included, stays at or under 80%. Next, check your two clocks. Last, compare the cost of a new loan against the free routes above.
Things that make the file easier to review:
- A recent mortgage statement showing the payoff and the note date
- Proof of title time, especially after a recent purchase
- Income and debt documents, with extra attention if ratios run above 45%
- A plan for any second lien, since it counts against leverage
Lendmire’s best cash-out refinance program when you want to live in the property covers the owner-occupied side in more depth.
Key Terms Defined
Cash-out refinance: A new first mortgage that pays off the old one and lets you take cash, with no restriction on how the proceeds are used.
LTV (loan-to-value): The loan balance divided by the home’s appraised value.
CLTV: Loan-to-value that counts every lien on the home, including a second mortgage or HELOC.
PMI: Private mortgage insurance, which protects the lender on a conventional loan with less than 20% equity.
Seasoning: The age of the loan being paid off, or the time a borrower has been on title.
Limited cash-out refinance: A refinance that pays off the first mortgage and costs, with only incidental cash back.
Frequently Asked Questions
Does PMI block me from doing a cash-out refinance?
No. The new loan pays off the old one, and the old PMI policy ends at payoff. What matters is the leverage of the new loan, measured against a new appraisal.
Will taking more cash bring PMI back?
Yes, it can. Once the new loan exceeds 80% of value, the standard agency cash-out no longer fits, and mortgage insurance would apply above that line. The one exception is the wholesale no-MI lane described above, which has stricter score, occupancy and seasoning conditions.
How soon after buying can I cash out?
Usually not right away. The loan being paid off must be at least 12 months old, and a borrower must have been on title for six months. Exceptions exist for delayed financing after a cash purchase, inheritance and legal awards.
Do second liens matter?
Yes. A second mortgage or HELOC counts toward the leverage cap on a new loan. It also blocks early PMI cancellation on the original loan, because the CFPB lists no junior liens as a condition.
Can I cash-out refinance an FHA loan to remove mortgage insurance?
Often, yes, by refinancing into a conventional loan if you have enough equity, credit and income. The Homeowners Protection Act cancellation rights do not apply to FHA insurance, so refinancing is a common route.
Where to Go From Here
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. Reach the team at 828-256-2183 or request a quote through Lendmire’s quote page.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Lendmire arranges FHA, VA, conventional and jumbo purchase and refinance loans through wholesale lenders; every file is underwritten by the lender under the applicable program guidelines. 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. Fannie Mae Eligibility Matrix
2. Fannie Mae Announcement SEL-2023-01
3. Freddie Mac Guide, Section 4301.5
4. Consumer Financial Protection Bureau
5. Fannie Mae Servicing Guide B-8.1-04
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 Lenders When Doing Your First Conventional Cash-Out Refinance · Best Cash-Out Refinance Program on a Home Financed With Homeready · Best Cash-Out Refinance Program Without PMI on a Conventional Loan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- 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.