The Quick Read: Yes, in most cases. You can pay off an FHA loan with a new conventional cash-out loan, and the FHA mortgage insurance premium (MIP) ends when the old loan is paid off. Two gates have to open first. You must qualify on your own, and the condo building must pass conventional project review, which is a different test from the one FHA used.
The building is where most of these files stall. A strong borrower can still be turned away because the project fails.
How Does the Swap Work?
You take out a new conventional loan. It pays off the FHA loan, covers the closing costs, and sends you the leftover equity as cash. The FHA loan is gone, and so is its insurance. That is the whole idea.
The new loan is the payoff, plus costs and prepaid items, plus the cash you want. Divide that total by the appraised value and you get the new loan-to-value ratio (LTV). On a one-unit primary residence, conventional cash-out is capped at about the same share of value as an FHA cash-out. Two- to four-unit homes get a lower cap.
Your FHA loan may be an option instead. The FHA cash-out refinance program reaches 80% LTV on a home you have owned and occupied for 12 months before the case number. It keeps FHA’s flexible credit standards. It also starts a fresh round of mortgage insurance. The conventional route is the one that ends it.
Across the wholesale programs Lendmire places FHA files with, the pattern is consistent. Borrowers lead with the insurance savings. The files that fall apart usually do so on the condo, not on credit or equity. So the order of checks matters, and we cover it below.
Will the MIP Actually Go Away?
Yes. FHA mortgage insurance belongs to the FHA loan. When that loan is paid off, the premium stops. What you owe on the new loan depends on how much equity is left.
Two outcomes are common:
- The new loan lands at or below the conventional cash-out cap. Private mortgage insurance (PMI) is generally tied to loans above 80% of value. A compliant cash-out at the cap typically carries none. So the monthly insurance line can disappear.
- The new loan lands above that point. Cash-out loans are capped, so this mostly arises on a no-cash-out refinance. There, PMI may apply. You have swapped one insurance for another. The difference is that PMI has legal cancellation rights, and FHA MIP generally does not.
Paying the balance down faster will not cancel FHA mortgage insurance on most loans. That is why a refinance is usually the only early exit.
Now the upfront premium. You paid one at the start of your FHA loan, likely financed into the balance. Treat it as spent. A new conventional loan does not give it back.
Rarely, MIP drops on its own schedule. We get to that timing question below, because it can decide whether a refinance makes sense at all.
Can Your Condo Qualify for Conventional Financing?
Not automatically. FHA project approval does not carry over to a conventional loan. The lender runs a fresh project review and gathers homeowners association (HOA) documents. The building can fail even if FHA allowed it.
Think of it as two gates:
1. The borrower gate. Credit, income, debt, equity, and seasoning.
2. The project gate. Whether the building itself is eligible.
The Fannie Mae Selling Guide sets the seasoning rules for conventional cash-out. The existing mortgage should be about a year old. At least one borrower should have been on title for around six months. A home listed for sale must come off the market before the loan funds. Higher debt-to-income files may need extra reserves.
The project gate is where the condo layer shows up:
| Your situation | What it means for conventional |
|---|---|
| Established attached condo | Full project review is the usual path |
| Small project | A waiver of full review may apply |
| Detached condo unit | Fewer project tests, but must be safe and sound |
| Building FHA-approved | Helpful background, not a pass |
| Building only on FHA single-unit approval | Still has to pass conventional review |
Fannie Mae’s condo FAQ says the Limited Review path has been retired for new applications. What remains is generally a Full Review or a qualifying waiver. In practice, that means more HOA paperwork and more chances for a building to be found ineligible.
Be careful with the waivers. Fannie Mae’s project-review waiver for refinances is aimed at its own limited cash-out loans. An FHA-to-conventional cash-out is a different transaction, so do not assume that waiver covers it.
Also note what FHA’s own approval routes mean here. Some condos get FHA financing through single-unit approval even when the whole project is not approved. That route worked for the loan you have. It does not exempt the building from the conventional test.
Detached units are a bright spot. Fannie Mae’s FAQ says critical-repair and special-assessment reviews are not required for detached units. The property still has to be safe, sound, and structurally secure.
Reviewers look hard at the same few things:
- Whether the HOA is financially healthy, including its reserve funding.
- Whether the master insurance policy meets the requirements.
- Pending litigation involving the association.
- How many units are owner-occupied versus rented.
- Critical repairs and special assessments, in the project types that require that review.
Occupancy matters too. The leverage figures above are for a primary home. A second home or rental unit gets lower caps. That is the one sentence this topic gets on rentals, and it comes back to how you use the home.
Is It Worth It If Your MIP Is Ending Anyway?
Sometimes not. Look at when your MIP is scheduled to end before you pay for a new loan.
Under HUD Mortgagee Letter 2023-05, loans endorsed under the current rules work like this. If your LTV at origination was 90% or less, annual MIP ends after eleven years. Above 90%, it lasts the whole loan term. So the starting LTV decides the schedule.
Older loans follow older rules. HUD’s answers page explains that some loans closed after 2001 with earlier case numbers can have MIP cancelled automatically at a set LTV after at least five years of payments. HUD does not use a new appraisal to test that cancellation. Your payoff schedule and original value decide it.
If your MIP is near its end, a refinance may add costs without much saving. If it will last for decades, the case for getting out improves.
Here is the break-even picture in words. On one side are the insurance savings each month. On the other are closing costs on a brand-new loan, any pricing adjustments, and the bigger balance if you take cash. If the savings take many years to repay the costs, the refinance is thin. If you expect to move or refinance again before then, it may not pay off.
The cash itself carries a trade-off. Cash-out turns equity into mortgage debt. That debt can push the new balance up, which can offset the insurance relief. It also puts your home at risk if payments become hard to carry. Take the amount you need and the project it serves. Skip the rest.
HOA dues sit outside all of this. They are separate from the mortgage, and they can rise if the association must build reserves. Fannie Mae and Freddie Mac have been tightening condo standards, so check how the association is funded.
FHA Cash-Out or Conventional Cash-Out for a Condo?
This is a genuine trade-off, so here are the two side by side:
| Factor | FHA cash-out | Conventional cash-out |
|---|---|---|
| Max LTV, one-unit home | 80% | Capped near the same share |
| Mortgage insurance | Upfront plus annual | Generally none at the cap |
| Credit flexibility | Wider | Often tighter |
| Condo test | FHA project rules | Conventional project review |
| Existing FHA MIP | Resets on new loan | Ends with old loan |
The FHA ceiling is 80%. HUD Mortgagee Letter 2019-11 is the notice that set that level, so any claim that FHA cash-out reaches the old, higher figure is out of date.
Here is how the two compare in practice. FHA is more forgiving on credit and ratios. Our wholesale programs start at a 580 decision score, with debt ratios running from 31/43 up to 40/50 with documented compensating factors. Conventional usually asks for stronger credit. In return, it can end the insurance.
An FHA-to-FHA cash-out is the one path that does not drop MIP. It begins a new schedule with the 1.75% upfront premium and an annual premium. That fits a borrower who needs FHA’s flexibility and accepts the cost.
This one is a toss-up for many owners. If your credit is solid and the building is clean, conventional probably wins. If your credit is near the floor, FHA may be the only door that opens.
What If the Building Fails Conventional Review?
You have four fallbacks:
- Stay put. If your MIP ends soon, you may lose little by waiting.
- FHA cash-out. You can still reach 80% LTV, but the condo must meet FHA’s project rules, and MIP resets.
- Wait and re-check. Buildings fix their insurance gaps and finish repairs. A project that fails today may pass later.
- Skip the cash. If you only need to shed MIP, a no-cash-out refinance reaches higher leverage, though PMI may apply above the cap. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
One trap deserves a name. Do not take an FHA cash-out now and plan to convert later. You pay closing costs twice, and you restart the MIP clock in between.
Step-by-Step: The Order That Saves Money
Check the building before you pay for anything. A sound sequence looks like this:
1. Find out when your MIP ends. Pull your original LTV and loan paperwork.
2. Ask about the project first. Have your loan officer check whether the building is eligible for conventional financing before ordering an appraisal.
3. Gather the condo documents. Expect the HOA questionnaire, budget, master insurance certificate, and any litigation or special-assessment disclosures.
4. Confirm seasoning. Check the note date on your FHA loan and how long you have been on title.
5. Size the cash. Decide how much you need, then check the new LTV against the cap.
6. Run the break-even. Compare insurance savings with closing costs and the larger balance.
7. Apply and read the Loan Estimate. Compare the full terms, not just one line.
The appraised value sets your LTV, and a full appraisal is generally part of cash-out underwriting. A low value can shrink the cash you can take.
Key Terms Defined
Mortgage insurance premium (MIP): FHA’s insurance charge, paid upfront and monthly, that ends only on a set schedule or when the FHA loan is paid off.
Private mortgage insurance (PMI): Conventional loan insurance, generally tied to loans above 80% of value, with legal cancellation rights.
Loan-to-value (LTV): The loan balance divided by the home’s appraised value.
Seasoning: The waiting period a lender requires, such as how long you have held the loan or title before refinancing.
Project review: The lender’s check of a condo building’s finances, insurance, and ownership mix.
Cash-out refinance: A new loan larger than the old one, with the extra paid to you as cash.
Frequently Asked Questions
Can I do a conventional cash-out on an FHA condo and keep the same project approval?
No. FHA project approval does not transfer. A conventional lender runs its own project review, and a building FHA allowed can still be declined. A building that fails conventional review can still work for FHA.
Will I get my FHA upfront premium back?
Plan on not getting it back. The upfront premium you paid at the start is generally treated as spent once the loan is paid off. That is why the break-even should count it as sunk, not recovered.
Does a conventional cash-out always remove mortgage insurance?
Usually, not always. A compliant cash-out at the cap generally carries no PMI. Credit, project factors, and pricing can still change the loan’s terms, so read the Loan Estimate for the specifics on your file.
What if I only want to drop MIP and need no cash?
A conventional no-cash-out refinance reaches higher leverage than a cash-out. Above the PMI line, you swap MIP for PMI. CFPB’s explanation shows that PMI can be requested off at a set share of original value, which FHA MIP generally cannot.
Does a small or detached condo make this easier?
It can. Smaller projects may qualify for a waiver of full project review, and detached units face fewer project tests. Each still has to meet insurance and safety requirements, subject to lender guidelines and full file review.
Your 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. As a mortgage broker, it arranges FHA and conventional loans through wholesale lenders, so you can see both routes laid out against your building and your numbers. Program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Selling Guide B2-1.3-03, cash-out refinance transactions
2. Fannie Mae condo project FAQ
3. HUD Mortgagee Letter 2023-05
4. HUD answers: how long MIP is collected on legacy loans
5. HUD Mortgagee Letter 2019-11
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 There an MIP Refund on an FHA Cash-Out From a Conventional Loan? · Can You Get an FHA Cash-Out When Conventional Is Too Costly? · Should a Current FHA Borrower Use FHA Cash-Out or Conventional?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.