The Quick Read: An FHA cash-out refinance carries government mortgage insurance in two parts, an upfront premium and an annual premium. A standard conventional cash-out refinance usually carries none, because private mortgage insurance generally starts above 80% loan-to-value and conventional cash-out stops at 80% on a one-unit home. The real comparison is what each loan costs once pricing is built in, and how long the insurance stays on the file.
The Short Version
- FHA charges mortgage insurance no matter how much equity you have. Conventional insurance follows leverage.
- FHA cash-out tops out at 80% of the home’s value, on a home you have owned and lived in for 12 months before the case number.
- The FHA upfront premium is 1.75% of the base loan and is usually financed into the balance.
- The FHA annual premium runs between 0.15% and 0.75% of the balance. The exact figure depends on term, loan amount and LTV.
- On a thirty-year FHA loan at or below 90% LTV, the annual premium ends after eleven years. Cash-out lands in that tier.
- Conventional insurance has legal cancellation points. FHA insurance follows separate rules, set by origination date.
- “No mortgage insurance” does not mean “cheaper.” Compare full Loan Estimates.
Key Terms Defined
Upfront mortgage insurance premium (UFMIP): A one-time FHA charge, set as a percentage of the base loan, that most borrowers roll into the loan balance.
Annual mortgage insurance premium (MIP): The FHA charge billed through the monthly payment, calculated from the loan balance and set by term, amount and LTV.
Private mortgage insurance (PMI): Insurance on a conventional loan that protects the lender when the borrower has less than 20% equity.
Loan-to-value (LTV): The loan balance divided by the home’s appraised value, shown as a percentage.
Lender-paid mortgage insurance (LPMI): Conventional insurance the lender buys and covers by charging a higher interest rate. The borrower cannot cancel it.
FHA cash-out estimate
Seeded with an example value, a balance to match, and a round cash request; change any field.
Editable benchmark: 7.32% as of October 22, 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.
Why the Two Products Charge Differently
FHA insurance is a feature of the program itself. Conventional insurance is a response to risk. That one distinction explains most of the gap you see on a cash-out file.
An FHA loan is insured by the federal government, and the borrower pays for that insurance on every FHA loan. The premium does not shrink because you have 45% equity. It is part of how the program works. Lenders can offer FHA’s flexible credit and ratio guidelines because the insurance backs the loan.
Conventional loans work the other way. The lender needs extra protection only when the borrower has a thin equity cushion. Once the loan sits at or below 80% of value, that need mostly goes away.
Here is the part that matters for cash-out. Both programs cap leverage at 80% on a primary residence. Taking cash out never pushes a conventional loan above the point where PMI starts. It does not lift an FHA loan out of insurance either. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
The result is a clean contrast. FHA cash-out carries the upfront premium and the annual premium. A standard conventional cash-out on a one-unit home generally carries neither. Lendmire’s FHA cash-out refinance program page covers how that structure fits an owner-occupied file. Across the wholesale programs Lendmire places FHA files with, the insurance line is rarely the surprise. The surprise is how much the other pricing adjustments change the comparison, which the “No PMI” section below covers.
Side by Side: FHA Cash-Out vs Conventional Cash-Out
| Factor | FHA cash-out | Conventional cash-out |
|---|---|---|
| Max LTV, primary home | 80% | 80% (one unit) |
| Insurance trigger | Every FHA loan | LTV above 80% |
| Upfront charge | 1.75% of base loan | None at 80% or below |
| Ongoing charge | Annual MIP, 0.15%–0.75% | None at 80% or below |
| Pricing basis | Term, amount, LTV | Credit score, LTV, insurer |
| Typical duration | 11 years at or below 90% LTV | Ends at statutory cancellation |
| Cancellation law | HUD rules by origination date | Homeowners Protection Act |
Program figures vary by lender, borrower and property, and are subject to lender guidelines and full file review.
How the Insurance Gets Built Into the Loan, Step by Step
1. Eligibility. FHA cash-out requires that you owned and lived in the home as your principal residence for 12 months before the case number. Conventional lenders set their own seasoning and occupancy terms.
2. Appraisal. The appraisal sets the value that the 80% cap applies to. On FHA, any second mortgage counts toward the combined LTV. A new first mortgage that pays off the old loan and returns cash must still fit under the cap with those liens included.
3. FHA premium calculation. The 1.75% upfront premium is figured on the base loan amount. Most borrowers finance it, so the final balance sits a little above the base loan. The annual premium is then set from three inputs: the loan term, the loan amount and the LTV. HUD’s Mortgagee Letter 2023-05 lays out the upfront premium and the annual schedule.
4. Conventional premium calculation. At 80% LTV or below, there is nothing to calculate. If a conventional loan did go higher, private insurers would price coverage by credit score and LTV. FHA’s schedule does not use credit score at all. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
5. Disclosure. Both loans show the insurance, if any, on the Loan Estimate and Closing Disclosure. The CFPB explains that mortgage insurance can be included in the monthly payment, the closing costs, or both. Read those two documents side by side for each loan.
6. Removal planning. This is where the two loans split furthest, and it gets its own section next.
How Long Each Lasts and How It Ends
FHA insurance on a cash-out loan lasts eleven years when the term is thirty years and the LTV is 90% or below. Conventional insurance ends at set legal points, and a cash-out loan at 80% LTV never starts it. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Take the FHA side first. 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. A cash-out borrower is capped at 80%, so the borrower falls into the shorter tier. This is a practical result of two rules working together. It is not a single line in the program rules. The upfront premium, though, is paid regardless. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Conventional PMI follows a federal law, the Homeowners Protection Act. The CFPB’s examination procedures describe the main points:
- The servicer must end borrower-paid PMI automatically at 78% of the original value, based on the initial payment schedule, when the borrower is current.
- The borrower can usually ask for cancellation at 80%.
- A final termination point applies after the midpoint of the loan term.
Two cautions apply. First, the law covers private insurance. It does not govern FHA premiums, so the idea that FHA insurance drops off at 20% equity is wrong. Second, a refinance restarts the clock. The new loan has its own schedule and a new appraised value, so earlier progress toward cancellation does not carry over.
If your goal is to leave FHA insurance behind, a refinance into a conventional loan is the usual route.
Where the General Rule Breaks
The contrast above holds for a one-unit primary residence. These situations bend it.
FHA to FHA refinance. If your current loan is FHA, part of the upfront premium you paid earlier may come back as a credit against the new premium. HUD’s FHA Connection documentation describes this unearned-premium credit. It shrinks as the old loan ages. It is a credit toward the new charge, not a check to you. A conventional loan refinanced into FHA gets no credit.
Older FHA loans. FHA loans endorsed before HUD changed its cancellation rules can follow the older removal terms, which were more favorable. If you hold an older FHA loan, check your origination date with HUD before you assume anything.
Multi-unit homes. Fannie Mae’s eligibility matrix caps conventional cash-out at 80% for a one-unit principal residence and 75% for two to four units. Second homes and manufactured homes run lower. The no-PMI logic still holds, since the cap sits under the trigger. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Lender-paid insurance. If a lender offers to cover conventional insurance in exchange for a higher interest rate, you cannot cancel it. It ends only when the loan is refinanced or paid off. That is a different trade from the borrower-paid PMI described above.
High-risk loans. The Homeowners Protection Act’s 80% and 78% rules do not apply to loans classified as high-risk under the law. Ask your lender how your loan is classified.
Special higher-LTV conventional programs. Some lenders offer exceptions. These vary by lender, so treat any such offer as its own product and read its Loan Estimate line by line.
“No PMI” Is Not “No Cost”
A conventional cash-out with no mortgage insurance line can still cost more than an FHA cash-out. Pricing for conventional loans moves with credit score and leverage, and those adjustments sit inside the interest rate or the closing costs instead of a line called insurance.
That cuts both ways, and the decision depends on your credit profile. A borrower with strong credit and a large equity cushion often finds the conventional route cleaner. The adjustments are small at that profile, and there is no insurance on top. A borrower with mid-range credit may find the adjustments add up. FHA’s premium schedule is not tied to credit score, so the FHA cost looks more predictable.
Picture two homeowners with the same house, each wanting to pull cash while staying at 80% of value. One holds a high credit score. The other is rebuilding after a rough stretch. For the first, conventional may look better. For the second, FHA’s flexibility on credit may decide it, even though the loan carries the 1.75% upfront premium and the annual premium. Credit minimums also differ by lender, so a floor one lender sets may not apply at another.
The way to settle it is to get a Loan Estimate for each loan and compare the full cost and cash to close, not just the insurance line. Compare the total monthly payment as well, since FHA insurance is built into it.
Which Borrower Fits Which Loan
- Staying many years, strong credit, solid equity: conventional often fits. There is no insurance to carry.
- Thinner credit, or recent credit events: FHA may be the more workable lane. HUD’s waiting periods apply after a bankruptcy or foreclosure, and those are HUD rules, not a promise from any lender.
- Planning to sell or move within a few years: the 1.75% upfront premium weighs more, since you have less time to spread it out. Run that against the monthly insurance cost.
- Planning to leave FHA later: a cash-out into FHA can still work, but expect a second refinance down the road. Lendmire’s piece Conventional Cash-Out vs FHA Cash-Out for Dropping FHA Mortgage Insurance covers that exit.
- Two- to four-unit owner-occupied home: conventional cash-out tops out lower than FHA’s 80%. Compare leverage first, then insurance.
Common Misconceptions
“FHA insurance cancels at 20% equity.” It does not. The cancellation law covers private insurance. FHA removal follows HUD’s rules based on when the loan was endorsed.
“Cash-out means a higher premium.” The upfront premium is the same 1.75% across FHA mortgages. The annual premium depends on term, amount and LTV, not on whether you took cash.
“FHA cash-out can go above 80%.” That ceiling was lowered to 80% some time ago, and older articles may still quote the previous cap. For cash-out, 80% is the number to plan around.
“80% LTV means I’m approved for that amount.” Underwriting also weighs payment history, credit, income and the new payment. The cap is a ceiling, not an offer. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
“PMI is always cheaper.” It is not. It depends on credit score, leverage and the insurer.
“I get money back on my upfront premium.” Any refinance credit applies only to an FHA-to-FHA refinance, and it offsets the new premium.
“Mortgage insurance protects me.” It protects the lender. Your benefit is access to a loan you might not otherwise get.
Next Step
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire, a mortgage broker arranging loans through wholesale lenders, can help you compare the programs and the equity each one reaches. All program details are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Frequently Asked Questions
Does a conventional cash-out refinance ever carry mortgage insurance?
Usually not, when the loan stays at 80% of value or below on a one-unit primary home. Insurance is generally required on conventional loans above 80% LTV, per Fannie Mae’s Selling Guide. Special programs that go higher are lender-specific, so ask for the details in writing.
Can I finance the FHA upfront premium on a cash-out refinance?
Yes, most borrowers roll the 1.75% upfront premium into the loan balance. That raises the balance slightly above the base loan. The annual premium is billed separately through the monthly payment.
How long do I pay FHA insurance after a cash-out refinance?
On a thirty-year term, eleven years, because the 80% cap puts you at or below 90% LTV. The upfront premium is paid at the start. Shorter terms follow their own schedule in HUD’s tables, so confirm the term you plan to choose. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Does refinancing into a conventional loan end FHA mortgage insurance?
It can, because the old FHA loan is paid off and the FHA premium stops. The conventional loan then follows conventional rules. At 80% LTV or below, there is typically no insurance. Compare the full cost of the new loan before deciding.
If I already have an FHA loan, do I get anything back on the premium I paid?
Possibly a partial credit, but only toward the new FHA premium and only on an FHA-to-FHA refinance. It declines over time. A refinance from conventional into FHA gets no credit.
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 2023-05
2. CFPB: What Is Mortgage Insurance and How Does It Work
3. CFPB Homeowners Protection Act examination procedures
4. Fannie Mae Eligibility Matrix
5. Fannie Mae Selling Guide B7-1-01
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 Much a Conventional Loan Saves Over FHA Insurance on a 2-4 Unit · Conventional Loan vs FHA Loan on a Condo: Insurance Cost and End Date · How to Remove FHA Mortgage Insurance on a 2-4 Unit Property
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.