The Quick Read: It depends on the loan program. A standard conventional cash-out refinance on a home you live in generally ends up with no mortgage insurance, because the leverage cap sits right where private mortgage insurance stops applying. FHA cash-outs always carry FHA mortgage insurance. VA cash-outs skip monthly insurance and charge a one-time funding fee instead. The two “Streamline” products are not cash-out loans at all.
Here is the short version by program:
| Factor | Conventional | FHA | VA |
|---|---|---|---|
| Insurance applies? | Generally no at the cap | Yes, always | No monthly insurance |
| Form it takes | Pricing adjustments, not insurance | Upfront plus annual premium | One-time funding fee |
| Can it be financed? | Not applicable | Upfront premium usually, yes | Usually, yes |
| Can it end? | Not applicable | Tied to the loan terms | Fee is one-time |
| Main trade-off | Needs real equity | Insurance on the whole new loan | Needs VA eligibility |
Everything below explains why the table looks this way, where the exceptions hide, and how to decide whether a cash-out is the right tool at all.
Why Does Mortgage Insurance Come Up With a Cash-Out?
Mortgage insurance protects the lender, not you, when a loan starts with thin equity. A cash-out refinance swaps your current loan for a bigger one and hands you the difference. Because the new loan is larger, lenders ask the same question they ask on any purchase: how much of this home’s value is borrowed?
That is why the topic confuses people. Insurance is tied to leverage. A cash-out is designed to leave you with a meaningful equity cushion, so the usual trigger often never gets pulled. The federal consumer-finance regulator says private mortgage insurance is usually required when you refinance a conventional loan with less than 20 percent equity. Put that next to the conventional cash-out cap and the pattern becomes clear.
Honest caveat: no single rule states it in one sentence. It’s an inference from how the pieces fit, which is why the word “generally” keeps appearing here.
Conventional Cash-Out: Why It Usually Has No Insurance
Conventional cash-out refinances cap at 80% loan-to-value on a one-unit principal residence. The Fannie Mae Eligibility Matrix sets that ceiling, and it drops to 75% for two- to four-unit principal residences. Mortgage insurance is required above 80% LTV. So a cash-out that stays inside the cap generally never crosses the line.
Across the wholesale programs Lendmire places files with, that 80% cap is the number that does the work. You need to keep at least 20% equity after the new loan is sized. Say your home appraises at a value where your current balance already sits near 60% of it. Cashing out up to 80% is possible. If your balance already sits at 78%, there is little room to take anything, and the cash-out may not be worth pursuing.
One wholesale lane goes further. It reaches 89.99% LTV with no mortgage insurance, but only on a thirty-year fixed, primary residence, conforming balance, with a 680 score and a 50% ratio ceiling. It carries its own six months of seasoning. Texas homestead loans are the exception: the state constitution caps a cash-out there at the agency figure, and that wholesale lane is not written in Texas. Program terms like these are subject to lender guidelines and full file review, and none of it is a commitment to lend.
Pricing adjustments are not mortgage insurance
Here’s the catch that surprises people. Even without insurance, cash-out loans cost more to place than a rate-and-term refinance. Fannie Mae applies loan-level price adjustments by credit score and LTV, and its published matrix covers those adjustments. They show up as a different rate or fees, not as a monthly insurance line. Your Loan Estimate lays out what applies to your file.
So “no PMI” does not mean “no extra cost.” Read both lines.
FHA Cash-Out: Insurance Is Built In
An FHA cash-out always carries FHA mortgage insurance. There is no leverage level where it falls away, because the insurance is a feature of the program itself. Expect an upfront premium, usually financed into the balance, plus an annual premium collected in your monthly payment. FHA insurance amounts are set by HUD and shown on your Loan Estimate, so confirm them there rather than relying on any quoted figure.
Two details matter most:
- The cap. HUD’s Mortgagee Letter 2019-11 lowered the maximum FHA cash-out LTV and CLTV from 85 to 80 percent of adjusted value. Anyone still quoting 85% is repeating the old rule.
- It covers the whole loan. The premiums apply to the entire new balance, not just the cash you pulled out. A cash-out replaces your old FHA loan with a new FHA loan carrying its own insurance.
That second point is the real trap. Refinancing FHA into FHA does not escape insurance. It restarts the arrangement. If you want out of FHA insurance, a conventional cash-out can do it, but only if you have the equity (80% maximum) and the credit to qualify. For a borrower with modest credit and just enough equity, FHA may still be the only workable path, and that’s a legitimate choice. It just comes with insurance attached.
VA Cash-Out: A Fee Instead of Monthly Insurance
VA cash-out loans carry no monthly mortgage insurance. They charge a one-time funding fee, set by VA, which can usually be financed and may be waived for certain disabled veterans and surviving spouses. Lender caps on how much equity you can borrow against vary, so ask early.
Eligibility is wider than many veterans assume. The VA home loans page says a Certificate of Eligibility is needed for a purchase or cash-out refinance (you can get one through a lender, VA.gov, or by mail). And VA’s cash-out refinance lets a borrower refinance any existing loan, not just a VA loan, and borrow against the home’s value. The VA IRRRL is different: it requires an existing VA loan and cannot be used to take cash from equity.
Do the Streamline Loans Give You Cash?
No. FHA Streamline and VA IRRRL are rate-reduction tools, not equity tools.
On the FHA side, HUD’s Streamline page says the loan being refinanced must already be FHA-insured and current, the refinance must produce a net tangible benefit, and cash in excess of $500 may not be taken out. In the programs Lendmire arranges, the FHA Streamline needs no appraisal and only a limited credit review, which is exactly why it can’t size a cash-out. Without a value, nobody can calculate how much equity you could pull.
The VA IRRRL works the same way. It carries a 0.5% funding fee unless you’re exempt, needs no VA appraisal, and requires a net tangible benefit. If you want real cash, you need a true cash-out. If a Streamline is all you need, you’re solving a different problem.
What Happens to Your Current Mortgage Insurance?
A cash-out creates a brand-new loan, and the old one is paid off. Your existing PMI or FHA insurance ends with the old loan. The question is whether the new loan brings insurance back.
- Conventional loan with PMI now. If the new cash-out loan stays at or below 80%, it generally carries no PMI. That can feel like a win, but the larger balance changes your monthly payment, so look at the full picture.
- FHA loan now. The new FHA cash-out has its own insurance. A conventional cash-out can end FHA insurance if you qualify.
- VA loan now. No monthly insurance either way, but a new funding fee applies to the new loan.
Maybe you don’t need a cash-out at all
This is the section most competing explainers skip. If your goal is just to shed PMI, a cash-out may be the expensive route. Under federal law, you can request cancellation of private mortgage insurance when your balance is scheduled to reach 80% of the original value. The CFPB explains the conditions: a written request, a good payment history, no subordinate liens, and evidence the value hasn’t declined. The servicer must end it automatically at 78% if you’re current. That rule covers private mortgage insurance. It does not cover FHA or VA.
If you’re close to 80% and only want PMI gone, asking your servicer may beat refinancing. If you also need cash, that changes the math.
What Decides the Outcome?
Five things decide a cash-out with mortgage insurance, in roughly this order:
1. Appraised value. The maximum loan equals the LTV cap times the appraised value. FHA applies its cap to “adjusted value.” No capped cash-out can be sized without a current valuation.
2. The resulting LTV. Your payoff balance plus the cash you want, divided by value.
3. Occupancy. If the property is a second home or a rental, occupancy changes the leverage, and the agency caps sit lower.
4. Credit and debt ratios. Credit scores, income and debt-to-income are all reviewed. Our wholesale conventional programs start at a 620 decision score, though the automated finding governs most files, with a total ratio ceiling of 50%. Fannie Mae’s matrix also notes minimum reserves on cash-outs when the automated DTI exceeds 45%.
5. Seasoning. The first mortgage being paid off must generally be at least 12 months old (note date to note date), and a borrower must have been on title for six months. Exceptions exist for delayed financing, inheritance and legal awards.
Delayed financing is the one worth knowing. Under Fannie Mae’s cash-out rules, a recent cash buyer can do a cash-out within six months of purchase. Expect to document the purchase settlement and where the funds came from.
A Worked Scenario, Without the Dollar Signs
Picture a homeowner whose current loan balance is 60% of the home’s appraised value. They want cash for a renovation.
- Conventional. Cash-out up to the 80% cap is possible, which leaves them at the cap with generally no PMI. The extra cost shows up as pricing adjustments, not insurance.
- FHA. Also capped at 80% of adjusted value, but with an upfront premium usually financed into the balance, plus a monthly annual premium. The financed premium counts toward the loan, so it trims the net cash they walk away with.
- VA, if eligible. No monthly insurance. A funding fee is added, usually financed, and that also reduces the net cash.
Now change one input: suppose the homeowner has much less equity, so the loan balance sits much closer to the home’s appraised value. Conventional leaves almost no room. FHA is capped too. Waiting, or choosing a different product, may be smarter. Pricing and available terms vary by lender, borrower profile, property type, and full underwriting review.
Notice what drives the difference: equity, not the product name. That’s the part that’s easy to lose in the marketing.
Is It Worth It? A Break-Even Checklist
A cash-out is a bigger loan, so the question is whether the cash earns more than it costs. Run through these:
- Purpose. Does the cash go toward something that adds value or retires costlier debt?
- Insurance drag. On FHA, premiums apply to the whole balance for as long as the loan lasts. That favors a shorter holding period or a plan to refinance later.
- Time horizon. How long will you keep this loan? Upfront costs spread thinner over a longer hold.
- Payment growth. The new balance is larger, so the payment grows with the cash taken, even when no insurance applies.
- Alternatives. A home equity loan or HELOC leaves your first mortgage alone, which matters if your current loan is better than what’s available now.
- Waiting. If the numbers only work with insurance attached, a year of principal paydown can change the answer.
For a first-time borrower with limited equity and decent credit, FHA may be the right tool anyway. For a borrower with strong equity, a conventional cash-out usually costs less to carry. The flip point is the equity cushion.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Key Terms Defined
PMI (private mortgage insurance): Insurance on a conventional loan that protects the lender when equity is below 20%.
MIP (mortgage insurance premium): The FHA version of mortgage insurance, charged as an upfront premium plus an annual premium.
Funding fee: A one-time VA charge that stands in for monthly mortgage insurance.
LTV (loan-to-value): Your loan balance divided by the home’s appraised value.
Loan-level price adjustment: A pricing add-on for cash-out loans based on credit score and LTV. It is pricing, not insurance.
Net tangible benefit: The measurable gain a Streamline must show, such as a lower payment.
Frequently Asked Questions
Does a cash-out refinance require mortgage insurance?
Not always. A conventional cash-out generally has none, because the 80% cap sits where PMI stops. FHA cash-outs always carry FHA insurance, and VA cash-outs carry a funding fee instead of monthly insurance. Your lender’s own guidelines and your full file control the final answer.
Can I get a cash-out refinance if I already pay PMI?
Yes. The old loan and its PMI end when the new loan pays them off. If the new loan stays at or below 80% LTV, it generally has no PMI. If you only want PMI removed, ask your servicer about cancellation first. It may cost less than refinancing.
Can I get rid of FHA mortgage insurance with a cash-out?
Only by refinancing into a non-FHA loan, such as a conventional cash-out, or by selling. A new FHA cash-out replaces your insurance with a fresh set of premiums. A conventional loan needs the equity and credit to qualify.
Does an FHA Streamline give me cash?
No. HUD limits cash back on a Streamline to $500, and the loan being refinanced must already be FHA-insured and current. A borrower who wants real equity needs a true cash-out.
Do I need a VA loan to use a VA cash-out?
No. A VA cash-out is open to eligible veterans with non-VA loans. The VA IRRRL is the one that requires an existing VA loan, and it cannot be used for cash.
Next Steps
Start with your equity. Estimate where your current balance sits against a realistic value, then see which programs reach the cash you want without pushing you into insurance. If you’re weighing a cash-out against keeping the loan you have, Lendmire can help you compare the cash-out refinance programs and the equity each one reaches. For a deeper look at how the mechanics work, Lendmire’s explainer What Is Cash Out Refinance Mortgage covers the basics, and the piece on whether you pay mortgage insurance on a cash-out refinance goes deeper on the insurance side. All program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Equity, not the loan label, decides whether mortgage insurance shows up on a cash-out.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s refinance programs 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.
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References
1. CFPB
2. Fannie Mae Eligibility Matrix
4. HUD Mortgagee Letter 2019-11
7. CFPB: When can I remove PMI from my loan?
8. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
This article is part of Lendmire’s Refinance series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: Is a Smaller Cash-Out Refinance Worth It With a Low First Mortgage? · Can You Get a Cash-Out Refinance on a Paid-Off Condo? · Can You Cancel a Cash-Out Refinance on a Mortgage Worth Keeping?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.