The Quick Read: A conventional cash-out refinance ends FHA mortgage insurance because it pays off the FHA loan, and the premium belongs to that loan. The new loan has to clear tests the FHA loan did not. Those tests are the condo project’s eligibility, a leverage cap that leaves real equity in the home, and time on title. If the condo project passes and the new balance stays low enough, the new loan may carry no mortgage insurance at all.
Key Takeaways
- FHA mortgage insurance premium (MIP) is part of the FHA loan contract. A rising home value does not remove it on current FHA loans.
- Paying off the FHA loan with a non-FHA loan is the usual way to end MIP early.
- On a condo, the lender reviews the project as well as you. A strong borrower can still be blocked by a project that fails conventional standards.
- Another FHA loan, including an FHA cash-out, keeps mortgage insurance.
- Whether the switch pays off depends on the new loan’s cost, the closing costs, and how long you keep the home.
Why FHA MIP Stays Until the Loan Is Gone
The annual premium on an FHA loan runs between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV. There is also an upfront premium of 1.75% of the base loan, usually financed into the balance. How long the annual premium lasts depends on the loan-to-value ratio on the day the loan was made:
- Above 90% LTV on a thirty-year loan, the annual premium lasts for the term.
- At or below 90% LTV, it ends after eleven years.
FHA cash-out estimate
Seeded with an example value, a balance to match, and a round cash request; change any field.
Editable benchmark: 7.18% as of November 5, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not an FHA cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the FHA cap on a principal residence with the upfront premium financed, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
An illustration, not a Loan Estimate, an approval, a quote, or a commitment to lend. The rate shown is the weekly Freddie Mac thirty-year conventional benchmark, used as a market reference; an FHA cash-out is priced by the lender at lock, and this is not an FHA cash-out refinance quote. HUD’s cap limits the base loan; the upfront premium is financed on top of the capped base loan; the monthly premium for the first year follows the snapshot’s schedule. Cash available means the base loan the cap permits less the balances retired, before closing costs, which this calculator leaves out. The line figure applies the line program’s combined loan-to-value ceiling to the same value and balance. Taxes and insurance are estimates you can edit. Licensed in sixteen states for consumer mortgages.
Those durations come from HUD’s FHA Resource Center, which also says borrowers cannot request early cancellation by prepaying principal. A new appraisal does not change the schedule either. Only origination LTV, the loan term and the payoff date matter.
Many FHA condo buyers put down the 3.5% minimum, since FHA financing reaches 96.5% of the price from a 580 decision score. Those loans start well above the 90% line, so the premium ends only when the loan is paid off.
FHA loans with older case numbers follow an older rule. Their premium can cancel once the balance falls to a set share of the original value after a minimum number of years of payments. The HUD Resource Center explains how long mortgage insurance premiums are collected on loans with case numbers assigned before June 3, 2013, and HUD does not use a new appraisal there either. Check your case-number date before you pay for any refinance, because an older loan may not need a refinance at all.
How the Conventional Cash-Out Works, Step by Step
A conventional cash-out replaces your FHA loan with a new loan that is not FHA-insured. Here is how the deal works.
1. Confirm your FHA clock. Pull the case-number date and the original LTV. They tell you whether MIP would end at eleven years or run for the term.
2. Check the condo project first. Before spending money on an appraisal, ask the lender to screen the building. The FHA loan needed FHA project approval or single-unit approval. The conventional loan needs the project to meet conventional standards, and those are a different test.
3. Confirm seasoning. For a cash-out, at least one borrower generally must have been on title for six months before the new loan funds. Lenders may add their own rules about how long the loan being paid off has existed.
4. Order the appraisal. A full appraisal sets the unit’s value. The lender must be able to support both the unit’s value and the project.
5. Run the leverage test. Conventional cash-out on a one-unit primary home generally caps at 80% LTV, the same figure as the FHA cash-out cap. Any second lien counts toward that same cap, so it reduces the cash available.
6. Underwrite the borrower. Credit, income and debt ratios are reviewed under conventional guidelines. Your HOA dues count in the debt-to-income ratio.
7. Pay off the FHA loan at closing. The servicer issues a payoff statement, the old loan is retired, and FHA MIP stops with it.
The leverage cap is why most conventional cash-out loans on a primary home carry no mortgage insurance. Stay at or below the cap and there is generally nothing to insure. Push past it and the loan generally needs private mortgage insurance, or it is simply not available.
Why a Condo Changes the Answer
On a single-family home, the appraisal and the borrower decide the file. On a condo, the building is also underwritten. The unit is only as financeable as the project around it.
What FHA checked. An FHA condo project has to be approved before individual units can be insured, according to HUD’s condominium guidance. Units outside approved projects can go through single-unit approval. That approval was tied to your purchase.
What a conventional lender checks. FHA approval does not carry over. Conventional lenders follow agency project standards, and they review the project again. They look at the HOA budget, reserves, insurance, owner-occupancy mix, delinquent dues and litigation. Fannie Mae’s project eligibility notice lists ineligible traits. Two examples are a meaningful share of owners far behind on dues and pending litigation tied to safety, structural soundness or habitability.
There is also a review waiver, and it probably does not help you. Fannie Mae’s Selling Guide waives project review only for certain refinances of loans Fannie Mae already owns. An FHA-insured loan is not one of those, so the full project review likely applies. Have your loan officer confirm that reading for your building.
Think of two owners with identical credit and equity. One lives in a building with healthy reserves and low delinquency, and the conventional refinance works. The other lives in a building with a large special assessment pending, and the same refinance stalls. Neither owner did anything different.
Project rules have also been shifting. Reserve expectations are reported to be rising, and some review categories are being retired. Treat any rule you read online as a starting point, and have the lender check the project status early. Status can change between application and closing.
FHA Cash-Out vs. Conventional Cash-Out vs. the Other Routes
Not every route ends MIP. This table separates them.
| Route | Ends FHA MIP? | Condo review | Cash out? |
|---|---|---|---|
| FHA Streamline | No, premium continues | No appraisal, so no new project review | No |
| FHA cash-out (80% LTV) | No, new premium starts | FHA condo approval | Yes |
| Conventional cash-out | Yes, if paid off | Full conventional review | Yes |
| Conventional rate-and-term | Yes, if paid off | Full conventional review | Minimal |
| Keep the loan, wait | Only when the clock ends | None | No |
Lendmire’s FHA cash-out refinance program is the right comparison point if you want cash but your condo project or credit profile fits FHA better than conventional. It reaches 80% LTV on a home you have owned and occupied for 12 months before the case number. It also brings a new upfront premium and a new annual premium, so taking cash this way means keeping mortgage insurance. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
The Streamline is the opposite case. It refinances an existing FHA loan with no appraisal and a limited credit review, and it requires a net tangible benefit. The premium continues, so it does not solve the problem this article is about.
Where the General Rule Breaks
The headline is that a conventional payoff ends MIP. Several situations break that headline.
The project fails conventional review. This is the biggest condo risk. High delinquency, litigation, thin reserves or single-entity ownership can make the unit ineligible. The refinance fails even if you are a strong borrower. A loan that is eligible for review can still be refused if the project’s status makes the unit unsellable to the agency.
Leverage is too high. If you want more cash than the cap allows, the loan shrinks or the file does not work. At higher leverage, a conventional loan generally needs private mortgage insurance. You would be swapping one premium for another.
The cash-out is small. If the only goal is to drop MIP and you want little or no cash, a limited cash-out (rate-and-term) refinance may fit better, and it can allow higher leverage than a cash-out loan. The tradeoff is that high leverage is the situation most likely to bring PMI back. This route also still requires the full project review.
Your credit or ratios fit FHA better. FHA starts at a 580 decision score and runs ratios from 31/43 up to 40/50 with documented factors. Conventional underwriting generally expects stronger credit and has less room at the high end of debt ratios. A borrower who qualified comfortably for FHA may find the conventional box tighter.
Your loan is old enough for an easier exit. Older case-number loans may already qualify for cancellation. Refinancing could cost more than it saves.
Your loan is close to its eleven-year end. If the original LTV was 90% or less, the premium is already scheduled to end. The remaining months may not justify new closing costs.
You have recently bought for cash. Delayed financing exists for all-cash buyers who want to recover equity soon after purchase. It does not apply to an existing FHA borrower.
MIP vs. PMI: How Each One Ends
This difference is the main reason the switch can pay off. FHA MIP ends on a schedule tied to origination LTV. Private mortgage insurance on a conventional loan works differently.
Borrower-paid PMI falls under the Homeowners Protection Act. Under the CFPB’s compliance bulletin, a borrower can request cancellation at a defined point tied to the scheduled balance reaching 80% of the original value, and investor guidelines cannot override that right. Lender-paid mortgage insurance is the exception. Cancellation rights do not apply to it, so ask which kind a loan carries.
The practical read is simple. If the new conventional loan ends with no mortgage insurance, there is nothing to cancel. If it carries PMI, it can come off by request or by statute. FHA MIP on a current loan offers neither exit.
What the Decision Looks Like in Practice
Picture a homeowner who bought a condo with the 3.5% minimum and has paid on the FHA loan for several years. Values have risen. She wants to drop MIP and pull out some cash for a renovation. Her path looks like this:
- Her FHA case-number date shows the premium runs for the loan term, so waiting is not a short wait.
- Her building passes the lender’s early project screen.
- After the new loan, her equity sits at or above what the one-unit primary cap requires.
- Her credit and debt ratios clear conventional guidelines, with HOA dues included.
If all four hold, the conventional cash-out can retire the FHA loan, end MIP and fund the renovation. If the third one fails, she can take less cash and see whether the numbers still hold. If the second one fails, she is looking at FHA cash-out, a second lien, or waiting.
Cash-out loans carry loan-level price adjustments from the agencies, so a cash-out generally costs more than a plain rate-and-term refinance. Those adjustments change periodically, and a loan officer can show the current effect on a Loan Estimate.
Here is a short break-even checklist:
- Compare your total monthly cost today (principal, interest, MIP, taxes, insurance, HOA) with the same lines on the new loan.
- Add up the one-time closing costs: appraisal, title, lender charges.
- Estimate how many months of savings it takes to repay those costs.
- Ask whether you expect to keep the home longer than that.
- Remember that a larger balance from cash taken out can offset the MIP savings.
The upfront premium you already paid does not come back through the new loan.
Key Terms Defined
MIP (mortgage insurance premium): The insurance charge on an FHA loan, made up of an upfront premium and an annual premium.
PMI (private mortgage insurance): Insurance on a conventional loan, usually required when the down payment or remaining equity is small.
Cash-out refinance: A new loan larger than the one it pays off, with the difference paid to the borrower or used to clear other liens.
Seasoning: The minimum time you must have owned the home, or held the loan, before a new loan is reviewed.
Warrantable condo: A condo project that meets agency standards for budget, reserves, owner-occupancy, delinquency and litigation, so loans on its units can be sold.
LTV (loan-to-value): The loan balance divided by the home’s appraised value.
Weighing It Against the Loan You Have
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. Lendmire is a mortgage broker. The work is lining up the FHA and conventional paths side by side so the condo project, the leverage cap and the cost of the new loan are all on the table together. Every program figure is subject to lender guidelines and full file review, and none of it is a commitment to lend.
Frequently Asked Questions
Does an FHA cash-out refinance remove MIP?
No. A new FHA loan starts a new premium schedule, including a new upfront premium. Cash-out on FHA reaches 80% LTV on a home you have owned and occupied for 12 months before the case number. Only paying off the FHA loan with a non-FHA loan ends the FHA premium. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Will I pay PMI instead of MIP after a conventional cash-out?
Only if leverage on the new loan is high enough to require it. Cash-out loans on a one-unit primary home carry a cap close to 80% LTV, which is why many carry no mortgage insurance. If PMI does apply, it follows cancellation rules that FHA MIP does not offer. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Can my FHA-approved condo fail a conventional refinance?
Yes. FHA project or single-unit approval is a separate test. Conventional lenders review the HOA’s budget, reserves, insurance, delinquency and litigation under agency standards. A building can pass one test and fail the other, so ask the lender to screen the project before you pay for an appraisal.
How long do I need to own the condo before a cash-out?
For a conventional cash-out, at least one borrower generally must be on title for six months before the new loan funds. Some lenders add rules about the age of the loan being paid off. That can differ from the 12-month owned-and-occupied test on an FHA cash-out.
Is a conventional cash-out worth it if my FHA loan is nearly eleven years old?
Often not. If your original LTV was 90% or less, the annual premium is already scheduled to end after eleven years. Compare the remaining months of MIP with the closing costs on the new loan. A short remaining window rarely repays those costs.
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.
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References
2. HUD FHA Resource Center: MIP cancellation for older case numbers
3. HUD FHA Connection help: condominiums
4. Fannie Mae’s project eligibility notice
5. Fannie Mae Selling Guide: Waiver of Project Review
6. CFPB Compliance Bulletin on PMI cancellation and termination
This article is part of Lendmire’s FHA cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How an FHA Cash-Out Works on a Condo in a High-Cost State · FHA Cash-Out Refinance Options That Roll Closing Costs Into the Loan Amount · How an FHA Cash-Out Appraisal Works on an Existing FHA Loan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.