The Quick Read: An FHA cash-out refinance is a brand-new loan, and it brings its own mortgage insurance schedule. Because the loan tops out at 80% of the home’s value, the annual premium normally runs for eleven years and then stops. It does not follow you for the whole loan term. The upfront premium is a one-time charge, usually financed into the balance. All of this is subject to lender guidelines and a full file review.
What Do You Need to Know First?
Here is the short list before the detail:
- Two premiums, not one. An upfront premium of 1.75% of the base loan, plus an annual premium billed monthly.
- The annual premium ranges from 0.15% to 0.75% of the balance. Where you land depends on term, loan amount and LTV.
- LTV at the start decides the duration. At or below 90%, the annual premium ends after eleven years. Above 90%, it lasts the term.
- A cash-out caps at 80% LTV, so it lands on the shorter schedule.
- The old loan’s history does not carry over. The new loan starts its own count. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
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.
What Are You Actually Paying For?
FHA mortgage insurance protects the lender, not you. That is the trade for getting a loan with less equity and more flexible credit rules than many other programs allow. You pay for it twice.
The first charge is the upfront premium: 1.75% of the base loan. Most borrowers finance it into the balance instead of paying cash at the table. The second is the annual premium, a percentage of your balance. It is split into twelve parts and added to your monthly payment.
The annual rate depends on three inputs: the loan term, the size of the base loan, and the LTV. Shorter terms sit at the low end of the range. Larger loans and longer terms sit higher.
Here is the part that surprises people. The annual premium is charged on the new, larger balance. A cash-out loan carries more premium dollars than a no-cash-out refinance of the same home would, because you owe more.
How Long Does the Annual Premium Last After a Cash-Out?
For most FHA cash-outs, the annual premium lasts eleven years. That holds when the loan term is longer than fifteen years and the starting LTV is 90% or less. Since a cash-out cannot exceed 80%, it fits the shorter schedule.
HUD’s published duration rule for newer case numbers is simple. If the LTV was above 90% at origination, the premium runs to the end of the loan term or thirty years, whichever comes first. The same page says borrowers cannot request early cancellation just because they prepaid principal.
HUD’s rule text does not describe a cash-out as “resetting” anything. The conclusion follows from two rules working together: the cash-out LTV cap and the 90% breakpoint. Under HUD’s rules, a compliant cash-out lands in the eleven-year tier.
The same HUD page also settles the common comparison with conventional loans. FHA premiums do not drop off when you hit 80% equity the way private mortgage insurance often can. The clock decides.
Does the Clock Restart When You Refinance?
Yes, in the sense that matters: the new loan gets its own schedule. The old loan is paid off and gone. The new loan has a new origination, a new case number, and its own eleven-year count.
That cuts two ways. Picture a borrower on an older FHA loan who started above 90% LTV. That loan may have carried premiums for its full term. A cash-out at 80% or less moves that borrower onto the eleven-year tier, which is a real improvement. Now picture a borrower in year nine of an eleven-year schedule. Refinancing starts a fresh eleven years, so the two remaining years become eleven. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
| Situation | Old loan | New FHA cash-out |
|---|---|---|
| Old loan started above 90% LTV | Premium for the term | Eleven years |
| Old loan started at 90% LTV or less | Eleven years, partly used | Fresh eleven years |
| Old loan is conventional | No FHA premium | Eleven-year premium period begins |
This is the number to weigh before you sign. The cash you receive has to justify the extra years of premium, not just this year’s payment.
What Does the Premium Look Like Year by Year?
The schedule is easier to see laid out. Assume a term over fifteen years and a starting LTV of 90% or less. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
| When | What happens to the premium |
|---|---|
| Closing | Upfront premium of 1.75% of the base loan, usually financed |
| Years 1 to 11 | Annual premium billed monthly on the current balance |
| Each year | The dollar amount shrinks slowly as the balance falls |
| End of year 11 | Annual premium stops |
| After that | Principal, interest, taxes and homeowners insurance continue |
Notice that the premium line gets smaller on its own. It is a percentage of a shrinking balance. It does not stay flat for eleven years, though the drop is gradual.
A Worked Example in Percentages
Take a home appraised and adjusted at 100% of its value. The lender caps the whole new loan at 80% of that value, and the cap covers every lien being paid off, not just the cash you take.
Say the current mortgage balance is 50% of the home’s value. Closing costs and any financed items come out of the room under the cap. What is left is your cash, roughly 30% of the home’s value before costs. The “80% cap” does not mean you receive 80% in cash.
In this example the starting LTV is 80%. That is below the 90% line, so the annual premium runs eleven years. The upfront premium is figured on the base loan, and HUD measures LTV for premium purposes before the financed upfront premium is added.
If the same borrower took no cash out and refinanced at 50% LTV, the premium percentage might be the same or lower, but it would apply to a much smaller balance. That is why a bigger cash-out increases the total premium you pay, even though the duration is the same. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Key Terms Defined
Upfront mortgage insurance premium (UFMIP). A one-time charge of 1.75% of the base loan, usually added to the balance.
Annual mortgage insurance premium (MIP). A yearly percentage of your balance, collected in monthly pieces with your payment.
Base loan amount. The loan before the financed upfront premium is added. Premium tiers are keyed to it.
LTV at origination. The loan amount divided by the home’s adjusted value on the day the loan starts. It decides how long the annual premium lasts.
Adjusted value. The appraised value after FHA’s own adjustments. The 80% cap is measured against it.
Refund credit. A credit toward a new upfront premium when you refinance FHA to FHA. It is not cash.
How Does a Lender Set Your Premium Step by Step?
1. Ownership check. For a cash-out, you must have owned and lived in the home as your primary residence for 12 months before the FHA case number is assigned. The count runs back from the case number date, not the application date. Confirm the exact wording in HUD Handbook 4000.1.
2. Appraisal. The appraisal produces the adjusted value, and the 80% cap applies to it. HUD lowered that cap from a higher level for cash-out refinances, so older articles quoting a higher number are out of date.
3. Base loan. The new loan pays off the old mortgage and any liens, covers financed costs, and leaves the remainder as your cash.
4. Tier selection. The lender picks the premium tier from three inputs: base loan size, term, and LTV. HUD’s annual schedule lays out the combinations. Check it on hud.gov for the current version, since HUD updates it by mortgagee letter.
5. Collection. The annual premium is divided by twelve and added to your payment.
Where Does the General Rule Break?
The eleven-year answer is the norm. A few situations bend it.
- Shorter terms. A term of fifteen years or less also runs eleven years at 90% LTV or less, with annual percentages at the low end of the range.
- Larger loans. Bigger base loans pay a higher annual percentage. The duration stays the same.
- Hawaiian Home Lands (Section 247). These loans carry no annual premium and were left out of the 80% cap change.
- Streamline refinances. An FHA Streamline refinances an existing FHA loan with no appraisal and a limited credit review. It must show a net tangible benefit, and the premium continues. It is not a cash-out, so these duration rules do not apply the same way.
- Occupancy. FHA cash-out is for a principal residence only. A second home or rental does not qualify. Occupancy decides leverage.
- Paid-off homes. Taking cash out of a home with no mortgage still counts as cash-out, with the same 80% cap.
- Older case numbers. Loans from before HUD’s current duration rule follow different collection rules. If your loan is that old, check the mortgagee documents. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
The upfront refund deserves its own sentence. If you refinance FHA to FHA, you may receive a credit toward the new upfront premium. It is a credit, not a check. It shrinks with time since the old loan closed. It does not apply if you refinance into a conventional loan. Confirm current refund details against HUD’s refund table, since this article does not quote percentages.
How Does FHA Cash-Out Compare With the Alternatives?
| Option | What happens to mortgage insurance | Main tradeoff |
|---|---|---|
| FHA cash-out | Upfront premium plus eleven years of annual premium | Flexible credit rules, 80% cap |
| Conventional cash-out | Private mortgage insurance may apply, depending on leverage | Stricter credit and ratio expectations |
| Second lien or HELOC | None added to the first loan | Your first mortgage stays as is |
| Wait and build equity | Existing schedule keeps running | Cash comes later, if at all |
A HELOC or second loan can look attractive when your current rate is one you want to keep. The CFPB notes that cash-out refinances can raise foreclosure risk through higher balances and payments, and that HELOCs tend to be cheaper. Those are tradeoffs worth looking at, not reasons to rule anything out.
How Do You End the Premium Early?
You cannot cancel it by paying down principal on a newer FHA loan. The practical way out is to refinance into a loan with no FHA premium, usually conventional. This only helps when the numbers support it.
Three things decide the break-even:
- Equity. A conventional loan with little equity may bring its own private mortgage insurance, which can swap one premium for another.
- Closing costs. You pay them again, so you need to keep the new loan long enough to absorb them.
- Years left on the premium. With only a year or two to go, compare the new closing costs against the premium you would still pay before deciding.
Talk this through before you take cash out, not afterward. A borrower who plans to refinance in three years has paid costs twice and stacked upfront premiums.
What Do People Get Wrong About This?
- “FHA premiums last for life.” Not on a cash-out at 80% LTV. They end after eleven years.
- “It drops off at 80% like conventional PMI.” It does not. The clock decides.
- “The cap means I get 80% in cash.” The cap covers the whole loan, including the payoff.
- “Zero cash to close means zero closing costs.” Costs can come out of your proceeds.
- “I get my upfront premium back in cash.” At most it is a credit, and only FHA to FHA.
- “My eleven years keep running from the old loan.” The new loan has its own count. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
What Should You Check on Your Loan Estimate?
Your Loan Estimate and later your Closing Disclosure show the payment with mortgage insurance and escrow included. Look at these lines:
- The mortgage insurance line within your monthly payment.
- Whether the upfront premium is financed or paid in cash.
- The difference between total closing costs and “Cash to Close.” They are not the same number.
- The loan amount compared with your home’s value, so you can see the real LTV.
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.
Frequently Asked Questions
Does an FHA cash-out refinance have mortgage insurance?
Yes. It carries both the upfront premium of 1.75% of the base loan and an annual premium billed monthly. The annual percentage depends on term, loan amount and LTV.
How many years of annual MIP will I pay after a cash-out?
Usually eleven. Because a cash-out caps at 80% LTV, it falls on the shorter schedule for loans at or below the 90% line, under HUD’s duration rule. Your lender confirms the tier for your file.
Can I cancel MIP once I reach 20% equity?
Not on newer FHA loans. HUD says borrowers cannot request early cancellation by prepaying principal. The premium ends when the scheduled duration ends, or when you refinance into a loan without FHA insurance.
Can the upfront premium be rolled into the loan?
Yes, in most cases. It is added to the balance, though HUD measures LTV for premium purposes on the base loan before it is added. You could also pay it in cash.
Do I get my old upfront premium back?
Only as a credit, only when refinancing FHA to FHA, and only within a limited window after the old loan closed. It reduces the new upfront premium and is not paid out in cash.
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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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. HUD Answers: How long is MIP collected
2. HUD Handbook 4000.1 (HUDClips index)
3. HUD press release on the cash-out LTV reduction
4. HUD Mortgagee Letter 2023-05
6. CFPB Loan Estimate explainer
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 Limits How Much Home Equity You Can Take · FHA Cash-Out vs VA Cash-Out for a Veteran With a Co-Trustee · FHA Cash-Out vs Conventional Cash-Out After a Withdrawn Listing
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.