The Quick Read: The answer depends on the loan program, and on a conventional loan it is often nothing at all. FHA adds an upfront premium on top of your base loan, plus a monthly premium. VA adds a one-time funding fee instead of monthly insurance. Conventional cash-out loans usually stop at 80% of the home’s value, which is where private mortgage insurance normally stops mattering.
Key Takeaways
- FHA and VA charges are usually financed, so they raise your new loan balance instead of coming out of your pocket at closing.
- The FHA upfront premium is a percentage of the whole base loan, not just the cash you take out.
- A conventional cash-out at the standard leverage cap generally carries no mortgage insurance.
- Financing a premium raises the balance and the interest on it. It does not raise the cash in your hand.
- Private mortgage insurance can be cancelled. FHA premiums generally cannot be cancelled on request.
What Does “Mortgage Insurance” Mean on a Cash-Out Refinance?
It is a charge that protects the lender, or the government, if you stop paying. The form it takes depends on the loan type: private mortgage insurance on conventional loans, FHA premiums on FHA loans, and a funding fee on VA loans.
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.
A cash-out refinance replaces your current mortgage with a larger one. You keep the difference as cash. Bigger loans against the same home mean less equity cushion, and that cushion is what mortgage insurance stands in for.
For the programs themselves, Lendmire’s cash-out refinance programs page lays out the options and the equity each one reaches.
How the Insurance Gets Added, Step by Step
1. The loan is classified. A conventional lender sorts it as limited cash-out or true cash-out. Taking more than small incidental cash, or paying off certain second loans, makes it a cash-out.
2. The appraisal sets the value. Value drives your loan-to-value ratio (LTV), which is the loan as a percentage of the home’s value. LTV drives the maximum loan and whether private insurance applies.
3. The base loan is capped. The base loan is the amount before any financed premium or fee. The program’s leverage cap applies to it.
4. The insurance or fee is calculated. On FHA, the upfront premium is a percentage of the base loan. On VA, the funding fee is a percentage of the loan amount.
5. You finance it or pay it. Financed, it is added to the balance and earns interest. Paid in cash, the balance stays lower but you need more at closing.
6. The paperwork shows it. Your Loan Estimate and Closing Disclosure show the financed amount, the monthly insurance line and the final balance. Compare them line by line.
Cash to you equals the base loan minus your payoffs and closing costs. The financed premium is not subtracted from your cash. It sits on top and raises what you owe.
How the Balance Changes: A Plain Example
Take a simple picture with no dollar figures. Say your FHA base loan is set at the program cap. The upfront premium is a fixed percentage of that base. The new balance is the base plus that slice.
| Line | What happens |
|---|---|
| Base loan | Set by LTV cap and appraisal |
| Financed upfront premium | Percentage of the base, added on top |
| New balance | Base plus premium |
| Cash to you | Base minus payoffs and costs |
| Monthly insurance | Separate charge, paid with the payment |
Notice the premium never touches your cash figure. It only increases the debt.
Same Premium Rule, Different Cash-Out Sizes
Because the charge applies to the whole base loan, the size of your cash-out changes how heavy it feels.
| Cash-out size | Base loan | Premium load vs. cash |
|---|---|---|
| Small | Mostly the old payoff | Heavy per dollar of cash |
| Medium | Payoff plus real equity | Moderate |
| Large | Near the leverage cap | Lightest per dollar of cash |
A small cash-out on FHA can feel expensive. You pay the premium on your entire loan to extract a modest amount. Run that math before you decide.
Program by Program: What Gets Charged
| Program | Insurance charge | Rolls into balance? |
|---|---|---|
| Conventional cash-out | Usually none at the 80% cap | Not applicable |
| Wholesale no-MI lane | None, to 89.99% LTV | Not applicable |
| FHA | Upfront plus monthly premium | Upfront piece, yes |
| VA | One-time funding fee | Yes, often financed |
Conventional: Why the Number Is Often Zero
A conventional cash-out on a one-unit primary residence tops out at 80% LTV. The cap is lower, at 75%, for two- to four-unit principal residences, second homes and investment properties. Private mortgage insurance is required above 80% LTV on the agency path, with the wholesale no-MI cash-out lane described below as the one exception. So at the standard cap, there is usually nothing to add.
That lane deserves a closer look. One wholesale option reaches 89.99% LTV with no mortgage insurance. It needs a 680 score, a 50% total ratio, a thirty-year fixed rate, a primary residence and a conforming balance. It carries its own six months of seasoning. Subject to lender guidelines and full file review, it lets you pull more equity without a monthly insurance line.
Conventional cash-out still carries a pricing add-on based on LTV and credit score. Fannie Mae’s Selling Guide describes this loan-level price adjustment. It is built into pricing, not billed as insurance.
FHA: Two Charges
FHA has an upfront premium and an annual premium collected monthly. The upfront premium is a percentage of the Base Loan Amount, per HUD’s Mortgagee Letter 2023-05. It is normally financed. Because the cap applies to the base loan, the premium sits on top of the capped amount.
Annual premium rates were reduced for loans endorsed after March 20, 2023, per the same letter. How long the annual premium lasts depends on LTV and loan term. Check HUD’s current appendix for your numbers.
VA: A Fee, Not Monthly Insurance
VA loans carry no monthly mortgage insurance. They carry a one-time funding fee instead. The VA’s funding fee page says the fee applies to the loan amount, and refinance fees do not change with a down payment.
The VA cash-out fee is higher than the 0.5% fee on an IRRRL, VA’s streamline refinance for existing VA loans. Some veterans are exempt. Ask your loan officer which applies to you.
Pay at Closing or Finance It?
Financing keeps cash in your pocket today. It also raises your balance and means you pay interest on the premium for as long as you hold the loan.
Paying at closing does the opposite. You bring more cash or take less out, and the balance stays smaller. Neither choice is wrong. The right one depends on why you are borrowing.
Consider a homeowner pulling cash for a one-time repair. Financing the premium may be fine if they plan to sell or refinance again within a few years. A homeowner planning to stay for decades should weigh the long-run interest on that financed slice.
Where the General Rule Breaks
Texas homesteads. A cash-out on a Texas homestead is capped at 80% of the home’s value by the state constitution. The wholesale no-MI lane is not written there.
Second liens. Paying off only a purchase-money second loan can keep a conventional refinance in the limited cash-out category. Paying off other liens and taking cash pushes it into cash-out pricing.
FHA exemptions. Certain older FHA loans refinanced through Streamline or Simple Refinance are exempt from the upfront premium.
FHA-to-FHA refunds. Refinancing one FHA loan into another can bring a refund credit on the earlier upfront premium. The credit offsets the new premium. It is not paid in cash. Ask your loan officer whether yours applies.
Lender-paid insurance. On conventional loans, insurance can be paid by you or built into the loan’s pricing by the lender. The cancellation rights differ between the two.
Seasoning. Cash-out loans have waiting clocks. The first mortgage being paid off must be at least 12 months old, and you must have been on title for 6 months. Exceptions exist for delayed financing, inheritance and legal awards.
Occupancy. Occupancy sets the leverage cap on a conventional cash-out. A one-unit primary residence is capped at 80% LTV, while two- to four-unit principal residences, second homes and investment properties are capped at 75%.
Getting Out: What Can Be Cancelled
Conventional private mortgage insurance has an exit. Under the Homeowners Protection Act, the CFPB explains that you can ask to cancel at 80% of the home’s original value. The servicer must end it automatically at 78%. Conditions apply, including a good payment history, no junior liens and no decline in value.
Those rights cover private mortgage insurance. They do not cover FHA premiums or the VA funding fee. The usual way out is refinancing, subject to the duration rule. The VA fee is a one-time charge, so there is nothing to cancel.
Common Misreadings
“Insurance applies only to the cash I take.” On FHA, it applies to the whole base loan.
“VA means no added cost.” There is no monthly insurance. There is a funding fee, and it is often financed.
“Upfront means paid in cash.” Often it is financed and shows up as a higher balance.
“A cash-out always means mortgage insurance.” Not on a conventional loan at the standard cap, and not on the no-MI wholesale lane.
“The balance effect equals the cash effect.” Financed premiums raise your debt. They do not reduce or raise the cash you receive.
When the Trade-Off Makes Sense
Start with the equity you need. If a conventional cash-out reaches it, you likely skip insurance entirely. If you need more than 80% LTV allows, look at whether the no-MI lane fits your score and property. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
FHA can make sense when credit or equity rules out conventional. Accept that you pay a premium on the whole loan and carry monthly insurance. VA is often the lighter route for eligible veterans, since there is no monthly insurance.
Also compare against keeping your current loan. If your goal is small, a cash-out that adds insurance and resets your balance may cost more than it delivers. This is a judgment call, and a close one on small amounts.
A limited cash-out (rate-and-term) refinance is a different product. It pays off the existing first mortgage, the closing costs and a purchase-money second lien, with only incidental cash back. Mortgage insurance is required above 80% LTV on the agency path, with the wholesale no-MI cash-out lane as the one exception. Lendmire’s conventional program sheet lists typical annual premiums of 0.58% to 1.86% of the balance. Those figures are subject to lender guidelines and your full file.
Key Terms Defined
Base loan amount: The loan before any financed premium or fee is added. Program caps apply here.
Upfront premium: A one-time FHA charge, a percentage of the base loan, usually financed into the balance.
Annual premium: The FHA monthly insurance charge, collected as part of your payment.
Private mortgage insurance (PMI): Conventional insurance, generally required above 80% LTV on the agency path. The wholesale no-MI cash-out lane is the one exception.
Funding fee: The one-time VA charge on the loan amount, often financed.
Loan-to-value (LTV): Your loan as a percentage of the home’s appraised value.
Net cash: What you receive after payoffs and closing costs.
Frequently Asked Questions
Does mortgage insurance get added to my cash-out loan balance?
On FHA, the upfront premium is normally financed, so it raises your balance. On VA, the funding fee is often financed too. On a conventional cash-out at the standard cap, there is usually no insurance to add.
Is the premium charged only on the cash I take out?
No. FHA’s premium applies to the whole base loan. That is why a small cash-out carries a heavier insurance load per dollar of cash.
Does financing the premium reduce the cash I receive?
No. The financed premium sits on top of the base loan. Your cash comes from the base loan minus payoffs and closing costs. What changes is the debt you owe and the interest on it.
Can I cancel the insurance later?
Private mortgage insurance on a conventional loan can be cancelled at 80% of original value, and ends automatically at 78%, with conditions. The VA funding fee is one-time.
How can I take more than 80% of my equity without mortgage insurance?
One wholesale lane reaches 89.99% LTV with no mortgage insurance. It needs a 680 score, a 50% ratio, a thirty-year fixed rate, a primary residence and a conforming balance. It is not written on Texas homesteads, and all terms are subject to lender guidelines.
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. Reach the team at 828-256-2183. A cash-out is not a commitment to lend, and every figure here is subject to lender guidelines and full file review.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s refinance programs page.
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.
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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. VA Funding Fee and Closing Costs
2. Fannie Mae Selling Guide: Cash-Out Refinance Transactions
3. HUD Mortgagee Letter 2023-05
4. 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: How to Pay Out an Ex Without Selling Using a Cash-Out Refinance · Cash-Out Refinance vs Home Equity Loan With Mortgage Protection Insurance in Place · How Much Closing Costs Take From Your Cash-Out Refinance Proceeds
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.