The Quick Read: Usually no. Private mortgage insurance (PMI) is the insurance a conventional lender requires when you borrow more than 80% of your home’s value. A conventional cash-out refinance on a primary home is itself capped at 80% loan-to-value (LTV), meaning the new loan as a share of the appraised value. The cap and the PMI trigger sit on the same line, so a standard cash-out normally lands right at the edge of PMI. Paying off your FHA loan also ends the FHA mortgage insurance, because that insurance belongs to the old loan.
Why Is the Answer Usually No?
PMI depends on how much of the home’s value you owe, not on whether you took cash out. A conventional cash-out refinance on a one-unit primary home tops out at 80% LTV, and PMI generally starts above 80%. You can’t borrow into PMI territory on this product, so the two rules rarely meet.
Here is how that plays out. Say your home appraises at a certain value. The most the new loan can be is 80% of that number. The new loan has to cover your FHA payoff, any closing costs you roll in, and any debts you pay off at closing. Whatever is left over is your cash.
Fannie Mae, the company whose guidelines most conventional loans follow, publishes this cap. Its Eligibility Matrix lists 80% for a one-unit primary residence and 75% for a two-to-four-unit primary residence. Its Selling Guide says a conventional first mortgage above 80% LTV needs mortgage insurance, unless the lender uses another approved form of credit enhancement. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Put those together and you get the answer. Cash-out stops at 80%. PMI starts above 80%. Done.
One caveat: individual lenders can be stricter than the agencies. A lender might cap leverage lower, require a higher credit score, or price the loan differently. The 80% line is the baseline, not a promise about any single lender’s menu.
What Happens to Your FHA Insurance When You Refinance?
It ends. FHA mortgage insurance, often called MIP (mortgage insurance premium), is tied to the FHA loan. When a new conventional loan pays that loan off, the annual premium stops with it.
Two kinds of FHA premium exist. You pay an upfront premium, financed into the loan, and an annual premium billed monthly. Across the wholesale programs Lendmire places FHA files with, the upfront premium is 1.75% of the base loan. The annual premium runs between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV. These are program mechanics, not prices, and they are subject to lender guidelines.
How long the annual premium lasts matters for your decision. On a thirty-year FHA loan above 90% LTV, it lasts for the full term. At or below 90%, it ends after eleven years. HUD’s own mortgagee letter sets the upfront premium at 1.75% for most mortgages, and HUD has since folded that policy into its current handbook, so check the live premium grid there for the annual figures.
Here is the part that surprises people. Equity alone doesn’t remove FHA premiums on most loans. Conventional PMI has a built-in exit at 78% and 80%, and FHA premiums don’t work that way. That is why many borrowers with real equity refinance out of FHA.
The new conventional loan carries no FHA-style upfront premium either. Your original upfront premium is already behind you.
What Does the FHA Cash-Out Option Look Like Beside It?
The FHA cash-out refinance reaches 80% LTV on a home you have owned and occupied for 12 months before the case number is assigned. So on a one-unit primary home, the borrowing ceiling is about the same for FHA and conventional. The difference is the insurance that comes with each. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
You can read the details on Lendmire’s FHA cash-out refinance program page. Lendmire is a mortgage broker, so it arranges the loan through wholesale lenders and does not lend the money itself.
| Feature | Conventional cash-out | FHA cash-out |
|---|---|---|
| Max LTV, one-unit primary | 80% | 80% |
| Insurance on the new loan | None at or below 80% | 1.75% upfront plus annual |
| Annual insurance ends | Not applicable | Term, or 11 years |
| Credit bar | Typically higher | Starts at a 580 decision score |
| Home ownership clock | 6 months on title | 12 months owned and occupied |
The credit row is where FHA keeps its edge. The wholesale FHA programs Lendmire works with start at a 580 decision score. Conventional lenders typically ask for more, and some set floors above the agency minimum. If your credit has improved since you took the FHA loan, conventional gets more realistic. If it hasn’t, FHA may still be the better door.
A Worked Example Without Dollar Signs
Think in percentages of value. These figures are modeled assumptions, not market data.
Say your FHA balance is 70% of the home’s appraised value. You roll in closing costs worth about 3% of value. You want cash worth 5% of value. The new loan comes to roughly 78%, under the 80% cap, so no PMI applies.
Now push the cash wish to 10%. The total reaches about 83%, which is over the cap. Here is the key point: the lender doesn’t approve it and add PMI. It cuts the loan back to 80%, or the cash-out product is simply off the table at that size.
| Scenario | New loan vs. value | Outcome |
|---|---|---|
| Payoff 70% + costs 3% + cash 5% | About 78% | Fits, no PMI |
| Payoff 70% + costs 3% + cash 7% | About 80% | Right at the line |
| Payoff 70% + costs 3% + cash 10% | About 83% | Over the cap, reduce cash |
That mechanism clears up a common contradiction online. Some pages say cash-out never carries PMI, and others say it does if you take too much. The truth is that “too much” means the lender won’t make the loan at that size under the cash-out rules. Borrowers hit a wall, not a PMI bill.
What Pushes You Over the Line?
Several things move the number more than people expect.
Closing costs you finance. Rolling costs into the balance raises the new loan. Paying them from your own cash keeps the loan lower. Not ideal for everyone, but it can be the difference between fitting and not fitting.
A low appraisal. The appraisal sets the denominator. If the value comes in below your expectation, every percentage shifts up. A loan that sat at 78% on your estimate can read 82% on the appraiser’s number. The appraisal fee itself varies, so ask for it on your Loan Estimate.
Other liens. A second mortgage or home-equity line counts toward combined LTV, or CLTV, unless it is paid off at closing. The Eligibility Matrix applies the limit to LTV, CLTV and HCLTV alike.
If the numbers land over the line, you have four honest choices:
- Take less cash.
- Pay closing costs out of pocket instead of financing them.
- Wait and let the balance or value change.
- Stay in your FHA loan, or look at a different structure.
Each has a cost. Less cash means less to spend. Waiting means more months of FHA premiums. Staying FHA keeps the premium but may preserve a loan you like. Nobody can pick for you without your numbers.
Which Rules Can Block the Conventional Route Entirely?
Equity isn’t the only gate. Conventional cash-out has timing and qualification rules that catch recent FHA borrowers. Fannie Mae’s cash-out refinance guidelines set several of them.
- Loan age. The existing first mortgage must be at least 12 months old, measured from the old note date to the new one. A recent FHA loan under that age blocks this route.
- Time on title. At least one borrower must have been on title for six months before the new loan funds. Exceptions exist, including inheritance.
- Two separate clocks. Loan age and time on title run independently. Meeting one doesn’t satisfy the other.
- Reserves and ratios. For files run through Fannie Mae’s automated underwriting, six months of reserves is required if the debt-to-income ratio (DTI) exceeds 45%. DTI is your monthly debts divided by your monthly income.
- Listing status. A home that was listed for sale must be off the market by the time the new loan funds.
Exceptions exist. The 12-month rule doesn’t apply to paying off a subordinate lien or to a co-owner buyout under a legal agreement. Your loan officer can tell you whether one applies.
Credit and ratios also shape pricing. Conventional loans carry pricing adjustments that vary by credit score and LTV. A borrower near the 80% line with middling credit may find the conventional offer less attractive than the PMI-free label suggests. “No PMI” is not the same as “cheaper.”
By comparison, the FHA programs Lendmire places start at a 580 decision score. The base ratio pair is 31/43 with no compensating factors. Documented compensating factors can reach 40/50 at the top tier, though the automated finding governs most files. Everything stays subject to lender guidelines and full file review.
What If You Only Want a Lower-Cost Swap and Little Cash?
That is a different product, called limited cash-out. Fannie Mae allows far higher LTVs there, with a small cash-back allowance. PMI applies above 80%.
The highest-LTV limited cash-out terms are tied to Fannie Mae owning the existing mortgage. An FHA loan isn’t Fannie Mae-owned, so those top terms may not be available when you’re paying off FHA. Whether a specific scenario works is a point to verify with the lender. The cash-back allowance has changed recently, so treat any number you read online with suspicion.
Two-to-four-unit homes, second homes and investment properties carry lower cash-out caps than a one-unit primary home. If your property isn’t a one-unit primary residence, occupancy decides the leverage, and the 80% figure here doesn’t apply.
If PMI Does Apply, How Does It Come Off?
PMI is not permanent. If you end up in a conventional loan with PMI, federal rules give you a way out. The CFPB explains that servicers must end PMI automatically at 78% of the original value, if you’re current on payments. It must also end at the loan’s midpoint. On written request, you can generally cancel at 80% if you meet the requirements.
Those dates run on your original value and the loan’s payment schedule, not today’s appraisal. Early removal because your home rose in value is a lender-specific process, not a guaranteed right.
Keep an eye on it. Regulators have found servicers occasionally miss a cancellation date, so track your balance yourself.
Those 78% and 80% rights apply to PMI. They do not apply to FHA insurance. That is the whole reason this refinance question exists.
Should You Leave FHA at All? A Decision Framework
Compare total cost, not just the insurance line. Walk through these in order.
1. Check the clocks. Is your FHA loan at least 12 months old, and have you been on title six months?
2. Check equity. Take the appraised value times 80%. Does that cover your payoff, financed costs and desired cash?
3. Check credit and ratios. Do you meet a conventional lender’s score and DTI bar?
4. Compare the full picture. Look at the new loan’s balance, term and costs against your FHA loan. A larger balance, a restarted term and closing costs all count against the saved premium.
5. Find the break-even. Ask how long it takes for the dropped insurance to pay back your closing costs. If you may sell soon, the answer may be that you won’t recoup them.
(Honestly, step five is where many borrowers talk themselves out of a refinance, and that is a fine outcome.)
Who should probably not do this? Borrowers whose credit would price poorly on conventional, those whose ratios sit near the upper end, and those who plan to move soon. Also anyone who would have to take much less cash than they hoped. A cash-out refinance reduces your equity, and the 80% cap exists because lenders treat it as higher risk than a rate-and-term refinance.
An FHA-to-FHA move is also on the table. The FHA Streamline refinances an existing FHA loan with no appraisal and a limited credit review, but it requires a net tangible benefit and the premium continues.
Key Terms Defined
PMI (private mortgage insurance): Insurance on a conventional loan that protects the lender when you borrow above 80% of value.
MIP (mortgage insurance premium): The FHA’s version, with an upfront piece and an annual piece, tied to the FHA loan.
LTV (loan-to-value): The loan balance divided by the home’s appraised value.
CLTV (combined loan-to-value): The same idea counting all loans secured by the home, including second liens.
Cash-out refinance: A new, larger loan that pays off the old one and hands you the difference.
Seasoning: The minimum age of your existing loan, or time on title, before you can use a given refinance.
DTI (debt-to-income ratio): Your monthly debt payments as a share of your monthly income.
Amortization midpoint: The halfway point of a loan’s payment schedule, such as year 15 of a 30-year loan.
Next Step
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. Everything above is subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Frequently Asked Questions
Will my FHA mortgage insurance carry over to a conventional loan?
No. FHA insurance is tied to the FHA loan, so paying that loan off ends the annual premium. Whether the new loan needs any insurance depends only on its own LTV. At or below 80%, a conventional loan on a primary home normally has none.
Can I take more than 80% cash-out if I accept PMI?
Not on a standard conventional cash-out for a one-unit primary home. The 80% cap is a limit on the loan itself, not a PMI threshold you can pay your way past. Higher LTVs exist in limited cash-out refinances, but those give you only a small amount of cash back. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Can I refinance out of FHA if my loan is only a few months old?
Probably not into a conventional cash-out. The existing first mortgage must be at least 12 months old, measured note date to note date. The six-month title requirement is a separate clock. Different programs have their own timing, so ask a loan officer about your specific loan.
Does PMI come off automatically if I do end up with it?
Yes, in most cases, if you’re current on payments. Servicers must terminate it when the balance is scheduled to reach 78% of the original value. You can also request cancellation at 80%. Lender-paid mortgage insurance follows different disclosure rules, so check which type you have.
Is a conventional loan without PMI always cheaper than staying in FHA?
Not necessarily. Dropping the monthly premium helps, but a larger balance, a new term, closing costs and credit-based pricing all count. Compare the full terms on the Loan Estimate, then work out how long the savings take to cover the costs.
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.
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References
1. Fannie Mae Eligibility Matrix
2. Fannie Mae Selling Guide: Provision of Mortgage Insurance
3. HUD Mortgagee Letter on FHA mortgage insurance premiums
4. Fannie Mae Selling Guide: Cash-Out Refinance Transactions
5. CFPB: When can I remove private mortgage insurance (PMI) from my loan?
This article is part of Lendmire’s FHA Loan series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: Should FHA Homeowners Use a Conventional Cash-Out Refinance for Debt? · FHA Cash-Out LTV Limit When Moving From a Conventional Loan · FHA Cash-Out vs Conventional Cash-Out With Thinner Credit
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- 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.