The Quick Read: Usually no. A properly structured FHA cash-out refinance caps at 80% loan-to-value, and at or below 90% the annual premium ends after eleven years. Your old conventional loan has no say in that clock. The new FHA loan sets its own, based on how much you borrow against the home’s value.
Two terms are tangled in that question, so here is the clean version. A conventional loan carries PMI, or private mortgage insurance. An FHA loan carries MIP, the FHA’s own mortgage insurance premium. Moving from one to the other swaps one kind of insurance for the other.
Wait, Does a Conventional Loan Even Have MIP?
No. The mix-up is common, and it is easy to see why. Both products insure the lender against loss. Both show up as a line on your monthly bill. They work differently.
| Feature | Conventional PMI | FHA MIP |
|---|---|---|
| Who issues it | Private insurer | FHA program |
| Parts | Usually monthly | Upfront plus annual |
| Removal | Can often be cancelled | Ends by schedule, or by refinance or payoff |
| Tied to | Your loan’s terms | Term, loan amount and LTV |
If you are paying PMI today, you may be able to drop it once your equity builds. FHA works differently. Equity alone does not cancel MIP. The schedule does, or a refinance out of the loan.
How Long Does FHA Annual MIP Last?
It depends on your loan-to-value ratio (LTV) at the start. LTV is the loan balance divided by the home’s appraised value. On a thirty-year FHA loan above 90% LTV, the annual premium lasts for the full term. At or below 90%, it ends after eleven years. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
That is where the “MIP for life” idea comes from. It describes purchase loans with under 10% down. It was never a rule for every FHA loan. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
| Your LTV at the start | Annual MIP on a thirty-year loan |
|---|---|
| Above 90% | Lasts the full term |
| 90% or below | Ends after eleven years |
The annual premium itself runs between 0.15% and 0.75% of the balance. Where you land depends on term, loan amount and LTV. It is billed monthly as part of your payment. It also counts in your debt-to-income ratio, so it affects how much you can qualify for.
Why a Cash-Out Starts a New Clock
A cash-out refinance is a brand-new loan. It pays off your old mortgage, pays you the difference, and starts fresh terms.
Here is how the two rules connect. The FHA cash-out reaches 80% LTV on a home you have owned and lived in for 12 months before the case number. HUD’s 2019 mortgagee letter lowered the cash-out ceiling to that 80% mark. The lifetime trigger starts above 90%, per HUD Mortgagee Letter 2023-05. So a cash-out cannot reach the lifetime tier. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
HUD does not say “cash-outs get eleven years” in those words. It is the practical result of the two rules together. Both rules can be checked against HUD’s own text.
One technical point matters here. HUD measures LTV on the base loan, which leaves out the 1.75% upfront premium that is usually financed on top. The financed premium does not push you across the 90% line.
What does not matter:
- The type of loan you are paying off. Conventional, FHA, or something else, the new loan’s LTV sets the term.
- Your old PMI status. The old loan’s insurance history stays with the old loan.
- How many years you paid on it. The new FHA mortgage has its own eleven-year clock.
HUD’s FHA Resource Center lists the upfront premium at 1.75% of the base loan for purchases and refinances alike. A cash-out does not carry a bigger upfront premium. The cost shows up elsewhere, in the 80% cap.
The rule that sets the term is HUD’s published schedule. That schedule now sits in HUD’s current policy handbook, and the mortgagee letter above has been archived as superseded. A lender will confirm the handbook text that applies to your file.
A Quick Scenario, No Dollar Figures
Say you bought a home with a conventional loan and have lived there for several years. Values rose, you paid the balance down, and you want cash for a renovation. You are paying PMI, or you dropped it when you reached enough equity.
An FHA cash-out can borrow up to 80% of the appraised value. Suppose you ask for the full amount. Your base loan is 80% of value. That sits under the 90% line. Annual MIP runs eleven years from the start of the new loan.
Then the 1.75% upfront premium is added. Most borrowers finance it, so the balance is a little higher than the base loan. Interest accrues on it. You also have to keep at least 20% equity after the refinance, because 80% is the ceiling.
Compare that to your old situation. If you had no PMI, you are adding insurance you did not pay before. If you were paying PMI, you are swapping it for MIP and gaining an end date. Neither outcome is automatic. It depends on your numbers and the lender’s full file review.
Lendmire’s FHA cash-out refinance program page covers how Lendmire arranges these loans through wholesale lenders.
FHA Cash-Out vs. Conventional Cash-Out
The real question behind “MIP for life” is often “is FHA worth it?” It is a trade. Mortgage insurance on one side. Qualifying flexibility on the other.
| Factor | FHA cash-out | Conventional cash-out |
|---|---|---|
| Max LTV | 80% | Varies by lender and program |
| Mortgage insurance | Upfront plus annual | Often none at lower LTV |
| Ratio flexibility | 31/43 base, up to 40/50 with documented factors | Often tighter |
| Credit | Starts at a 580 decision score on the programs Lendmire places | Often higher floors |
| Occupancy | Principal residence | More options |
On most FHA files Lendmire arranges, the draw is flexibility. A borrower with a lower score, higher debt, or a recent credit bump may find FHA the only workable cash-out. A borrower with strong credit and plenty of equity can often find conventional cheaper over time, because it may have no mortgage insurance at all. This one is a genuine toss-up for borrowers in the middle, and the Loan Estimate lets you compare the two side by side.
When FHA Cash-Out Makes Sense (and When It Doesn’t)
It tends to fit when:
- Your credit score is in the lower range that conventional lenders avoid.
- Your debt-to-income ratio is higher than conventional underwriting likes.
- You want an end date on mortgage insurance and plan to hold the loan past eleven years.
- You have at least 20% equity left after the loan.
It tends not to fit when:
- Your credit and equity are strong enough that conventional carries little or no mortgage insurance.
- You plan to sell soon, so the upfront premium never pays back.
- The home is not your principal residence. Occupancy decides the leverage, and FHA cash-out is for the home you live in.
What the Lender Looks For
An 80% LTV does not mean approval is automatic. Approval is subject to the lender’s review, and here is what the lender typically looks at:
- Ownership and occupancy. You owned and lived in the home for the prior 12 months.
- Payment history. A clean recent mortgage record. Some lenders set stricter standards than HUD does.
- Credit, income and ratios. The automated finding governs most files.
- The appraisal. It sets the value that the 80% applies to.
- Existing loan documents. If the mortgage is missing from your credit report, expect extra paperwork.
Everything here is subject to lender guidelines and full file review. Nothing is a commitment to lend.
Exceptions Worth Knowing
A few edge cases bend the rules. Most borrowers will not hit them.
- Inherited homes. The 12-month occupancy rule can be waived if you have not treated the home as an investment. If you rented it out after inheriting, expect to occupy it first.
- Hawaiian Home Lands and Native lands. Per HUD’s mortgagee letter, Section 247 loans skip annual MIP. Section 248 loans skip the upfront premium.
- FHA-to-FHA refinances. If you are replacing a recent FHA loan, a partial refund credit on the upfront premium may apply, per HUD’s upfront premium guidance. A conventional payoff gets no credit.
- Older FHA streamlines. Special rules apply to certain early FHA loans. They do not touch a conventional-to-FHA cash-out.
How to Get Out of MIP Later
You have three routes out of FHA mortgage insurance.
1. Wait out the schedule. At or below 90% LTV, the annual premium ends after eleven years.
2. Refinance into a conventional loan. This removes FHA MIP if you have enough equity to avoid or cheaply carry PMI.
3. Pay the loan off. Sale or payoff also ends it. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Refinancing has its own closing costs, so run a break-even before you start. Lendmire’s piece How to Plan Your Exit From MIP After an FHA Cash-Out walks through that thinking. If you are still deciding between the two paths, staying with an FHA cash-out versus moving to conventional gets its own comparison.
Common Misconceptions
“FHA MIP is always for life.” Not true. It applies above 90% LTV at the start, per HUD’s announcement. A cash-out falls below that line. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
“A cash-out costs more in upfront MIP.” The upfront premium is the same 1.75% on purchases and refinances.
“The cap is higher than 80%.” Older sources still quote higher caps. Those are stale.
“My old loan type changes the MIP term.” It does not. The new loan’s LTV decides.
“Equity cancels MIP.” Not on FHA. Only the schedule, a refinance or a payoff does.
“MIP and PMI are the same thing.” They are cousins, not twins. MIP is FHA’s premium. PMI is private and conventional.
Key Terms Defined
MIP (mortgage insurance premium): FHA’s insurance on the loan, paid as an upfront premium plus a monthly annual premium.
PMI (private mortgage insurance): Insurance on conventional loans with lower down payments, which can often be cancelled later.
LTV (loan-to-value): Your loan balance divided by the home’s appraised value.
Base loan: The loan amount before the financed upfront premium is added.
Cash-out refinance: A new mortgage larger than your current balance, with the difference paid to you.
Case number: The FHA file number assigned to your loan, which starts the occupancy and payment-history look-back.
Frequently Asked Questions
Does a conventional loan have MIP?
No. Conventional loans use PMI, which comes from private insurers and can often be cancelled as equity grows. MIP is specific to FHA. If you refinance from conventional into FHA, you take on MIP and the PMI ends with the old loan.
Is the upfront premium refundable on a cash-out?
Not from a conventional payoff. A partial credit may apply only when an FHA loan is being replaced by a new FHA loan within a set window. Your lender can tell you whether your old loan is eligible for that credit.
Can I remove MIP before eleven years?
Equity alone will not do it. You would need to refinance into a conventional loan or pay the mortgage off. Run a break-even first, since a refinance has its own costs.
Does a bigger loan change the MIP term?
The annual premium rate can change with the loan amount. County loan limits apply. At 80% LTV, though, the duration still falls in the eleven-year tier. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Can I use an FHA cash-out on a rental or second home?
No. Occupancy decides the leverage, and FHA cash-out is for your principal residence.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
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. Figures here are subject to lender guidelines, and the leverage you actually get comes down to your appraisal and file review.
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.
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References
1. HUD Mortgagee Letter 2019-11
2. HUD Mortgagee Letter 2023-05
3. HUD FHA Resource Center: MIP structure
4. HUD Upfront Premium Payments and Refunds
5. HUD press release PR 23-041
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: Is an FHA Cash-Out Easier to Qualify for Than a Conventional Cash-Out? · Should FHA Homeowners Use a Conventional Cash-Out Refinance for Debt? · Can You Get an FHA Cash-Out After a Conventional Denial?
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.