The Quick Read: The deciding number is your loan-to-value ratio (LTV) on the new loan. Mortgage insurance is required above 80% LTV on the standard agency path, with one exception: a wholesale no-mortgage-insurance lane that reaches 89.99%. Keep the new loan at or under 80% and the insurance line never appears. Past that point you need the special lane, and it comes with stricter conditions. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Key Takeaways
- A conventional cash-out refinance on a one-unit primary residence tops out at 80% LTV. Two- to four-unit homes, second homes and investment properties top out at 75%.
- The first mortgage you are paying off must be at least 12 months old. You must also have been on title for 6 months, with a few named exceptions.
- A wholesale lane reaches 89.99% LTV with no mortgage insurance. It requires a 680 score, a 50% ratio ceiling, a 30-year fixed rate, a primary residence and a conforming balance.
- Having mortgage insurance on your current loan does not block a cash-out refinance.
- The appraisal sets your maximum loan, and financed closing costs eat into your cash. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Why Leverage Decides Whether You Pay Mortgage Insurance
Mortgage insurance protects the lender when you borrow a large share of your home’s value. The more you borrow against the home, the more risk the lender carries. So the requirement turns on the new loan’s size compared with the appraised value.
Cash-out refinance estimate
The starting figures are an example value with a balance and a cash request in proportion. Replace them with yours.
Editable benchmark: 7.18% as of November 5, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the agency cap on a one-unit principal residence, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a cash-out refinance quote; a cash-out loan is priced by the lender at lock. The cash available is the loan the program cap allows less the balances paid off, before closing costs, which are not included. The HELOC line is the program’s combined loan-to-value ceiling applied to the same value and balance. Taxes and insurance are editable estimates. Licensed in sixteen states for consumer mortgages.
On the standard conventional path, insurance is required above 80% LTV. The one exception is the wholesale no-mortgage-insurance cash-out lane described below. A cash-out loan sits under a lower leverage cap than a purchase loan. That is why cash-out and no-insurance tend to go together. If you stay at or under the cap, there is nothing to insure.
Lendmire’s cash-out refinance programs page lays out the programs a broker can place. In practice, this is how the cap works:
- One-unit primary residence: 80% LTV.
- Two- to four-unit primary residence, second home or investment property: 75% LTV. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Occupancy sets the leverage. You can write a cash-out on a primary home, a second home or a rental, but the less you live there, the less you can borrow.
If a second loan stays on the property, it counts toward the limit. The cap covers every lien on the home, not just the new first mortgage.
For perspective, Lendmire’s conventional program sheet lists typical annual mortgage insurance premiums of 0.58% to 1.86% of the balance. Whether your loan carries them depends on your leverage. Staying under the line removes the cost entirely.
Key Terms Defined
Cash-out refinance: a new mortgage that pays off your current one and hands you the difference in cash. You can use the proceeds however you like.
LTV (loan-to-value): the new loan, plus any liens left in place, divided by the appraised value.
Limited cash-out (rate-and-term) refinance: a refinance that pays off the old loan and costs, with only a small amount of cash back.
Seasoning: the waiting period a loan or ownership must meet before you can refinance.
DTI (debt-to-income) ratio: your monthly debts divided by your monthly gross income.
Reserves: savings left after closing, counted in months of housing payments.
Pricing adjustment: a charge that lenders build into pricing based on loan purpose, leverage and credit score. You rarely see it as its own line.
How the Loan Is Underwritten, Step by Step
Underwriting is the lender’s review of whether you and the home fit the rules. Here is the order it follows.
Step 1: The two clocks. Freddie Mac’s Guide section 4301.5 requires at least one borrower to have been on title for six months. It also requires any first lien being paid off to be at least 12 months old. That age is counted from its note date to the new note date. The six-month rule has exceptions, including delayed financing, inheritance and legal awards. A home owned free and clear is treated as a cash-out refinance too. Six months on title is only one of the two waits. The 12-month loan age catches people who refinanced recently.
Step 2: The appraisal. Your maximum loan is the cap multiplied by the appraised value. The appraisal decides it, not your hopes or an online estimate. A lower appraisal shrinks the loan and the cash.
Step 3: Credit. Wholesale conventional programs start at a 620 decision score. Higher scores open more room on leverage and pricing. The automated underwriting finding governs most files.
Step 4: Debts and reserves. The total ratio ceiling is 50% on an automated approval. Manually underwritten loans use 36% or 45%, with the reserve and score factors of the agency eligibility matrix. Reserves are one of those factors, and the Fannie Mae eligibility matrix sets how they apply to a cash-out file. The same document does not permit Community Seconds with a cash-out refinance.
Step 5: Pricing. Under Fannie Mae’s cash-out refinance rules in Selling Guide B2-1.3-03, a pricing adjustment applies by LTV and credit score. Pricing rises with leverage and falls as scores improve. It usually shows up inside the loan’s terms rather than as a separate fee.
Step 6: Closing. The new loan pays off the old mortgage and any other liens being paid. What remains is disbursed to you. Because this is a consumer mortgage, you receive a Loan Estimate up front and a Closing Disclosure before signing.
What decides the outcome? Equity left after the new loan, the appraised value, your score, your ratios, your reserves and those two clocks.
A Worked Example in Percentages
Say a home you expect to be worth 100 units appraises at exactly that. Your current mortgage sits at 60% of value. You live there, it is a single unit, and the loan is a standard agency cash-out.
- The 80% cap allows a new loan of up to 80 units.
- Payoff takes 60 of those units, so about 20 are left.
- Financed closing costs and prepaid items come out of that 20. What remains is your cash.
Now consider the variant where the appraisal comes in at 95. The cap drops to 76 units. After the 60-unit payoff, only about 16 remain before costs. A five-unit appraisal miss costs you four units of cash, because the cap takes 80% of the shortfall.
What if you take more? On the standard path, a request above 80% LTV hits the mortgage insurance line. It is also over the cap for a cash-out. The cap does not bend. So a borrower who wants more cash has to either use the no-insurance lane below or take less. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
The same house as a two- to four-unit primary residence, a second home or a rental drops the cap to 75%. At the 60% payoff, only about 15 units are left before costs. Occupancy changes the answer sharply.
Compare Your Routes Before You Choose
| Route | Cash to you | Mortgage insurance |
|---|---|---|
| Cash-out refinance | Up to the LTV cap | None at or under 80% on a one-unit home |
| Rate-and-term refinance | Only incidental cash | Required above 80% LTV |
| Cancel existing insurance | None | Request at 80%; ends at 78% |
| Second loan beside your first | Yes, separate loan | Your first loan stays as is |
Notice what the table shows. If your goal is only to shed insurance, cancellation can beat refinancing. If your goal is cash, the refinance path is the one built for it.
The No-Mortgage-Insurance Lane Above 80%
One wholesale lane reaches 89.99% LTV with no mortgage insurance. It is the only exception to the eighty-percent rule here. The conditions are narrow. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
- A 680 score.
- A 50% ratio.
- A 30-year fixed rate.
- A primary residence.
- A conforming loan balance.
- Its own six months of seasoning.
Miss any one of those and the lane closes. It works for a borrower with strong credit, a modest ratio and a fixed-rate preference who wants more cash than the 80% cap allows. It is not a fit for a second home, a rental or a loan above conforming limits.
One state note applies. In Texas, a cash-out on a homestead is capped at 80% of the home’s value by the state constitution. The wholesale lane is not written there. State rules can differ elsewhere too, so confirm yours.
Where the General Rule Breaks
Several situations bend the rules above.
Delayed financing. You bought with cash recently and want that money back. The new loan can be no more than your documented purchase investment plus financed closing costs and prepaids. It is still held to the cash-out cap on current appraised value. This is one of the named seasoning exceptions.
Student loan cash-out. When you use the proceeds to pay off student loans and meet the delivery rules, the cash-out pricing adjustment is waived. The usual LTV caps still apply.
Limited cash-out is a different product. A rate-and-term refinance can reach 95% LTV on a one-unit primary home, and 97% where the existing loan is agency-owned and the first-time-buyer program allows. Fannie Mae’s limited cash-out rules in Selling Guide B2-1.3-02 describe how the 97% option works. It covers fixed-rate loans only, with no high-balance loans or adjustable rates. The new loan pays off the old one, the closing costs and a purchase-money second lien. Cash back is incidental: for Fannie Mae, the lesser of 2% of the new loan amount or $2,000. For Freddie Mac, the limit is the greater of 1% of the new loan amount or $2,000. Take more than that and it becomes a cash-out, with a lower cap and a pricing adjustment. Insurance still applies above 80%. Every figure here varies by lender and program, and guidelines, property type, leverage, and credit profile all apply.
Buying out a co-owner. Under a written agreement, this is a limited cash-out transaction at both agencies. It is not a renovation feature.
Manufactured housing and unusual titling. Manufactured homes face tighter rules for cash-out, so treat them as a special review. Homes held in an LLC or partnership, and cooperative units, also have their own variations in the guides.
Existing mortgage insurance. Paying it today does not stop you. A new loan under the cap needs none.
How to Apply
Preparation does more than speed matters along. It stops surprises before they cost you cash.
1. Run your equity. Estimate your payoff against likely value. Pick the cap that matches your occupancy.
2. Check both clocks. Confirm your loan is at least 12 months old and you have been on title six months, or that an exception applies.
3. Pull your credit picture. Know your score against the 620 floor, and the 680 mark if the no-insurance lane interests you.
4. Gather documents. Typical items are recent pay stubs, tax returns or other income proof, bank statements, your current mortgage statement, homeowners insurance and ID.
5. Apply and get the Loan Estimate. Compare it against the loan you have today, and ask your broker to explain each line.
6. Complete the appraisal and underwriting conditions. Answer requests for documents promptly.
7. Review the Closing Disclosure. Check the loan amount, cash to you and costs before you sign.
The step many borrowers miss: ask for the cap, not the cash. Request the loan the appraisal supports, then see what remains after costs.
What If You Don’t Qualify Yet?
You have four sensible paths.
- Wait out a clock. A recent refinance or recent purchase may simply need more time.
- Take less cash. A smaller request fits under the cap more easily.
- Pay down the balance. A lower payoff means more room under the cap.
- Use a separate home equity loan. It leaves your first mortgage in place, though costs and terms differ. Compare closely.
After a credit event, waiting periods are agency rules. They are four years from a chapter 7 discharge, seven from a foreclosure and four from a short sale or deed-in-lieu. Documented extenuating circumstances can shorten them.
Is It Worth Doing?
A cash-out refinance replaces your loan with a larger one. The monthly payment can go up and the payoff can stretch out. Lenders also want you to keep a cushion of equity, which is general guidance rather than an agency rule.
Staying under 80% has one clear benefit: no insurance, and no cancellation chase later. On a loan that does carry insurance, the CFPB explains that you can ask to cancel at 80% of the original value, and the servicer must end it at 78% if you are current. Those triggers use original value, not a new appraisal. A rising market does not remove insurance automatically.
Ask what the cash is for. Debt payoff, repairs and a co-owner buyout all work differently. Run the full cost of the new loan, not just the monthly line.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Frequently Asked Questions
How much equity do I need to avoid mortgage insurance on a cash-out refinance?
At least 20% remaining after the new loan on a one-unit primary residence, since the cap is 80% LTV. Two- to four-unit homes, second homes and investment properties need at least 25%. The no-insurance wholesale lane lowers the equity floor to just over 10%, with strict conditions. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Does mortgage insurance on my current loan block a cash-out refinance?
No. Your current insurance is replaced when the old loan is paid off. If the new loan sits at or under the cap, no new insurance applies.
Can I refinance if I refinanced recently?
Usually not. The loan being paid off must be at least 12 months old, counted from its note date to the new note date. Named exceptions exist for special cases, so ask before assuming you are shut out.
Is a cash-out refinance the same as a second mortgage?
No. A cash-out refinance replaces your first mortgage with one new loan. A second mortgage sits beside the first, which stays as is.
What if I only want to drop mortgage insurance?
Cancellation may be the cheaper route. You can request it at 80% of the original value, and the servicer ends it at 78%. A refinance makes more sense when you also want cash or a different loan structure, 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. 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 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.
For the program’s current guidelines, see conventional loan programs.
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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. Freddie Mac Guide Section 4301.5, Cash-out Refinance Mortgages
2. Fannie Mae Eligibility Matrix
3. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
4. Fannie Mae Selling Guide B2-1.3-02, Limited Cash-Out Refinance Transactions
5. CFPB: When Can I Remove Private Mortgage Insurance PMI from My Loan
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Best Cash-Out Refinance Program Within Months of Closing on a Conventional Mortgage · Cash-Out Refinance Requirements to Pay Off Private Mortgage Insurance · Can a Conventional Cash-Out Refinance Keep Your First Mortgage in Place?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.