The Quick Read: On a standard conventional cash-out refinance of a one-unit primary home, PMI usually does not apply. The leverage cap is 80% of the home’s value, and mortgage insurance starts above that line. PMI shows up when a borrower moves to a limited cash-out refinance with higher leverage, or into a product above 80%. Rules vary by lender and loan, and everything here is subject to lender guidelines and full file review.
Why Does the 80% Line Decide Everything?
The cash-out cap and the mortgage-insurance trigger sit at the same number. Freddie Mac requires mortgage insurance on conventional loans above 80% loan-to-value, and the agency cash-out limit for a one-unit primary residence is 80%. A borrower who stays within the cap never crosses the trigger.
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.
Loan-to-value (LTV) is the new loan amount divided by the appraised value. Freddie Mac rounds the result up to the next whole number, so a ratio just over a line counts as the next percent. The appraisal is the denominator, which means a lower value shrinks the maximum loan one-for-one.
One exception is worth naming. Across the wholesale programs Lendmire places files with, there is a lane that reaches 89.99% LTV with no mortgage insurance. It requires a 680 score, a 50% ratio, a thirty-year fixed rate, a primary residence and a conforming balance, plus its own six months of seasoning. Among cash-out loans, it is the one exception to the eighty-percent rule. In Texas, a cash-out on a homestead (a Section 50(a)(6) loan) is capped at 80% of the home’s value by the state constitution, so the lane is not written there. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Key Terms Defined
- PMI (private mortgage insurance): Coverage on a conventional loan that protects the lender, paid by the borrower, usually required above 80% LTV.
- Cash-out refinance: A new loan larger than the old one, where the borrower receives the difference as cash.
- Limited cash-out (rate-and-term) refinance: A refinance that pays off the old loan and costs, with only a small, capped amount of cash back.
- Seasoning: The minimum time a loan or ownership must exist before it can be refinanced.
- LTV: The loan balance as a percentage of the home’s appraised value.
How Is the Loan Underwritten, Step by Step?
Think of a cash-out as a sequence of gates. Each one can change the PMI answer.
1. Classification. The lender decides whether the loan is cash-out or limited cash-out. Cash back beyond a small incidental amount makes it a cash-out.
2. Seasoning. Under Fannie Mae’s cash-out rules, the first mortgage being paid off must be at least 12 months old, measured note date to note date. A borrower also generally needs six months on title, with exceptions for delayed financing, inheritance and legal awards.
3. Appraisal. The value sets the ceiling.
4. LTV test. One-unit primary residences cap at 80%. Two- to four-unit homes, second homes and investment properties cap at 75%. Occupancy sets the leverage.
5. Mortgage insurance decision. At or under 80% on the standard path, none is required. Above 80%, it is, except in the wholesale no-MI lane described above.
6. Credit and ratios. The wholesale conventional programs start at a 620 decision score. The automated finding governs most files, with a total ratio ceiling of 50%. The Fannie Mae Eligibility Matrix adds minimum reserves on cash-out files when the ratio exceeds 45%.
7. Pricing. Cash-out loans carry price adjustments by score and leverage. Those are built into the loan’s terms, which the Loan Estimate shows.
Payoffs of other liens and financed closing costs come out of the cash the borrower receives. They do not raise the maximum loan. That is why “80% of my value” and “80% in my pocket” are very different numbers.
Where Does PMI Actually Appear?
PMI appears when the borrower chooses leverage above 80%. That happens in a few specific situations.
| Situation | PMI outcome | Typical path |
|---|---|---|
| Standard cash-out, 80% or less | None required | Take cash within the cap |
| Cash needed pushes past 80% | Above 80%, mortgage insurance applies, except in the wholesale no-MI lane | Take less cash, use a second lien, or ask about the no-MI lane |
| Limited cash-out, above 80% | Required, except no-MI lane | Pay off loan and costs only |
| Wholesale no-MI cash-out | None, within lane limits | 680 score, 50% ratio, primary home |
| Existing loan has PMI | Ends at payoff | New loan tested on its own LTV |
A limited cash-out refinance on a one-unit primary residence reaches 95% LTV, or 97% where the existing loan is agency-owned and the first-time-buyer program allows. The new loan pays off the first mortgage, closing costs and any purchase-money second, with only incidental cash back. Fannie Mae’s cap is the lesser of 2% of the new loan or $2,000. Freddie Mac’s is the greater of 1% of the new loan or $2,000. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
What Happens to the PMI on My Current Loan?
It ends when the old loan is paid off. The new loan is tested only on its own LTV, so a cash-out at or under 80% would generally carry no mortgage insurance at all. PMI does not carry over.
Cancellation rights on a new loan that does have PMI start fresh. The new appraisal likely sets the “original value” for the new loan’s schedule, though that point depends on how the servicer and investor apply the rules, so it is worth asking about directly.
For a loan with PMI, the Homeowners Protection Act sets the exit path. Per the CFPB’s guidance on removing PMI, a borrower can request cancellation when the balance is scheduled to reach 80% of the original value. The servicer must end it automatically at 78%. Early cancellation can require a good payment record, no junior liens, and proof the value has not fallen, sometimes through an appraisal.
Lendmire’s conventional program sheet lists typical annual mortgage insurance premiums of 0.58% to 1.86% of the balance. That is the program sheet’s range, not a quote. Actual cost depends on score, leverage and coverage.
Cash-Out vs. Staying Put: Does Avoiding PMI Mean Lower Cost?
Not automatically. Staying at 80% avoids PMI, but it also caps your cash and keeps 20% equity untouched. A higher-leverage structure could deliver more cash at the price of monthly insurance and slower equity rebuilding.
Think through it in three questions:
- How much cash do you need? If it fits under the cap after payoffs and costs, the standard cash-out is the cleaner structure.
- What does the old loan carry? If you already pay PMI, a cash-out that lands at 80% or below removes it. That is a real benefit, but weigh it against how long you would otherwise keep the old loan.
- Is a second lien an option? Some borrowers keep the first mortgage and add a second to avoid crossing the line. Whether that fits depends on the first loan’s terms and your overall costs.
Cost-comparison questions come down to the Loan Estimate. Lenders show the same figures in the same format, so you can set a cash-out beside a limited cash-out line by line.
Where Does the General Rule Break?
Several edge cases change the answer:
- Two- to four-unit homes, second homes and investment properties. Caps drop to 75%, so PMI is even less likely, but you need more equity.
- High-balance loans. Fannie Mae requires mortgage insurance above 80% here too, and any financed premium cannot push gross LTV above 95%.
- Lender-paid mortgage insurance. Cancellation rights under the Homeowners Protection Act apply to borrower-paid PMI. Lender-paid structures work differently.
- FHA. The act does not cover insurance under the National Housing Act, so FHA mortgage insurance follows its own rules. Conventional PMI is the one with a built-in exit.
- Delayed financing. A cash buyer can refinance soon after purchase, but it is still treated as cash-out and priced that way.
- Texas. A cash-out on a homestead (a Section 50(a)(6) loan) is capped at 80% of the home’s value by the state constitution, and the wholesale no-MI lane is not written there.
- Credit events. Agency waiting periods apply: four years from a chapter 7 discharge, seven from a foreclosure, four from a short sale or deed-in-lieu, shorter with documented extenuating circumstances.
Common Mistakes
- Assuming every cash-out means PMI. On the standard one-unit primary path, the cap and the trigger are the same line.
- Assuming old PMI follows you. It ends at payoff.
- Expecting PMI to drop the moment values rise. Cancellation is tied to original value and the amortization schedule, and early removal needs servicer conditions to be met.
- Confusing the two products. Limited cash-out and cash-out have different leverage caps, and the 12-month seasoning applies to cash-out.
- Counting 80% as cash. Payoffs, other liens and financed costs come out first.
What Should the Decision Look Like in Practice?
Start with the amount of cash you actually need, then work backward. If that amount fits within 80% after payoffs and costs, the standard cash-out is usually the simplest path, and PMI drops out of the picture. If you need more, you are choosing between taking less, adding a second lien, or accepting insurance on a higher-leverage structure.
Check eligibility early: seasoning on the existing loan, your score and ratios, and reserves if your ratio runs above 45%. Lendmire’s cash-out refinance programs page lays out how the options compare.
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. Lendmire is a mortgage broker arranging these loans through wholesale lenders, and nothing here is a commitment to lend.
Frequently Asked Questions
Does a conventional cash-out refinance require PMI?
Usually not. On the standard path for a one-unit primary home, the leverage cap is 80%, and mortgage insurance is required only above that. A limited cash-out refinance at higher leverage is where PMI normally appears.
Can I take more than 80% in a cash-out?
Not on the standard conventional path. The wholesale no-MI lane reaches 89.99% for a primary residence with a 680 score and a 50% ratio, on a conforming thirty-year fixed loan with six months of seasoning. Eligibility depends on lender guidelines and full file review.
Will my current PMI stop if I refinance?
Yes, the insurance on the old loan ends when that loan is paid off. The new loan is judged on its own leverage, so a cash-out at 80% or below generally carries none.
How long do I have to wait before a cash-out refinance?
The first mortgage being paid off must be at least 12 months old, note date to note date. The borrower also generally needs six months on title, with exceptions for delayed financing, inheritance and legal awards.
When can PMI be removed from a loan that has it?
You can request cancellation at 80% of the original value, with a good payment history, no subordinate liens and no decline in value.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. 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 §4701.1, Mortgage insurance
2. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
3. Fannie Mae Eligibility Matrix
4. CFPB’s guidance on removing PMI
5. Fannie Mae Selling Guide B5-1-02, High-Balance
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can You Get Approved for a Cash-Out Refinance With Conventional 12-Month Seasoning? · Cash-Out Refinance Lenders When Doing Your First Conventional Cash-Out Refinance · Best Cash-Out Refinance Program Without PMI on a Conventional Loan
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
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.