The Quick Read: On a conventional cash-out refinance, mortgage insurance usually never enters the picture, because the leverage cap sits at 80%. Insurance applies above 80% loan-to-value, and a standard cash-out stops there. FHA cash-out always carries mortgage insurance, and VA cash-out carries a funding fee instead. One wholesale lane goes past 80% with no mortgage insurance, but only for a narrow borrower profile.
What Does Mortgage Insurance Do on a Refinance?
Mortgage insurance protects the lender, not you, when the loan is a larger share of the home’s value. Fannie Mae’s Selling Guide requires it on a conventional first mortgage above 80% loan-to-value, and the test uses the appraised value.
That one sentence explains most of this topic. The appraisal sets the value. The value sets the maximum loan. The loan-to-value ratio decides whether insurance applies.
Across the wholesale programs Lendmire places files with, the pattern is consistent. Conventional files at or below 80% carry no insurance line. Files above 80% carry private mortgage insurance. Government loans use their own premium or fee instead.
Lendmire is a mortgage broker licensed for consumer lending in 16 states. It arranges these loans through wholesale lenders and does not lend directly. Every figure below is subject to lender guidelines and full file review, and none of it is a commitment to lend.
Key Terms Defined
- Loan-to-value (LTV): The new loan balance divided by the appraised value of the home.
- Private mortgage insurance (PMI): Insurance on a conventional loan above 80% LTV that protects the lender.
- FHA mortgage insurance premium (MIP): The upfront and annual insurance on every FHA loan, set by HUD.
- VA funding fee: A one-time charge on most VA loans, used instead of monthly mortgage insurance.
- Limited cash-out refinance: A refinance that pays off the old loan and closing costs, with only small cash back.
- Seasoning: The minimum time you must hold a loan or title before cashing out.
Why Does Cash-Out Rarely Trigger Mortgage Insurance?
Conventional cash-out is capped at 80% LTV on a one-unit principal residence, so the loan lands right where insurance starts. The cap is 75% on two- to four-unit principal residences, second homes and investment property. Fannie Mae’s Eligibility Matrix lists the same 80% and 75% limits. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Here is the walkthrough in plain words:
1. The appraiser sets the home’s value.
2. The lender takes 80% of that value as the ceiling for a one-unit home you live in.
3. The new loan must pay off the existing first mortgage, any liens you choose to pay off, and closing costs.
4. Whatever room remains is your cash.
5. Because the total stays at or under 80%, no insurance is required.
So “no MI” on a standard cash-out is not a special program. It is the result of the cap.
One detail catches people. Being a hair over the line counts as over. A low appraisal can shrink your cash or push a file into a different product.
Where Does Mortgage Insurance Actually Apply?
Mortgage insurance applies on the limited cash-out refinance product. That loan pays off the existing first mortgage, closing costs and a purchase-money second lien, with only incidental cash back. Because leverage is higher, insurance applies above 80%.
In the wholesale programs Lendmire works with, rate-and-term goes to 95% LTV on a one-unit principal residence. It reaches 97% where the existing loan is agency-owned and the first-time-buyer program allows it. Insurance above 80% is part of that deal. The Eligibility Matrix shows the same product at 97% for fixed-rate loans and 95% for adjustable-rate loans. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
One variation is worth knowing. Fannie Mae treats a refinance as limited cash-out when new subordinate financing is combined with the first-mortgage refinance, provided the first mortgage meets the limited cash-out criteria. Large cash back is not allowed on that product.
Here is how the two conventional products compare:
| Factor | Cash-out | Rate-and-term (limited cash-out) |
|---|---|---|
| Max LTV, one-unit home you live in | 80% | 95% (97% in some cases) |
| Cash to you | Any purpose | Incidental only |
| Mortgage insurance | Not at 80% or below | Required above 80% |
| Seasoning rule | 12 months on the loan paid off | Different test |
The same borrower can face different insurance outcomes depending on how the transaction is classified. Ask which one your file is.
How Do FHA, VA and Conventional Compare?
FHA and VA do not follow the 80% rule. FHA charges mortgage insurance regardless of equity. VA charges a funding fee and no monthly mortgage insurance. Conventional has none at or below 80%.
| Program | Cash-out cap | Insurance or fee | Key point |
|---|---|---|---|
| Conventional | 80% (one unit) | None at or below 80% | Cap does the work |
| FHA | 80% | Upfront plus annual MIP | Applies regardless of equity |
| VA | Set by the lender | Funding fee, no monthly MI | Fee depends on use |
FHA cash-out
FHA cut its maximum cash-out LTV from 85% to 80% in Mortgagee Letter 2019-11. The old 85% figure still circulates online, so ignore it. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
HUD’s Mortgagee Letter 2023-05 sets an upfront premium of 1.75% of the base loan on all FHA mortgages. The only carve-outs are certain Streamline and Simple Refinances of loans endorsed on or before May 31, 2009, plus Section 247 and 248 programs. The annual premium follows the same exceptions. Its schedule is in HUD Handbook 4000.1, Appendix 1.0, and varies with your loan’s terms.
That means an FHA cash-out always carries an annual premium in the monthly payment. Dropping to 80% does not remove it.
The FHA Streamline, for people who already have an FHA loan, involves no appraisal, limited credit review and a net tangible benefit test. It is a no-cash-out product, and it does not erase the insurance.
VA cash-out and the IRRRL
VA News lists the funding fee at 2.15% for first use and 3.3% after first use on a cash-out. The IRRRL, the VA’s streamline for existing VA loans, carries a 0.5% funding fee unless exempt. It has no VA appraisal, requires a net tangible benefit, and has seasoning of the later of 210 days and six payments.
“No monthly PMI” is the usual description of VA loans. Confirm it with the VA before relying on it. Some disabled veterans and surviving spouses are exempt from the fee. The IRRRL does not give you cash.
What Is the No-MI Option Above 80%?
There is a wholesale lane that reaches 89.99% LTV with no mortgage insurance. It requires a 680 score, a 50% ratio ceiling, a thirty-year fixed rate, a primary residence and a conforming balance. It carries its own six months of seasoning. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Here is where the cost lives. When insurance disappears, the cost does not vanish. It typically moves into the pricing of the loan itself. Lenders absorb the risk instead of an insurer, so a “no-MI” loan can cost more in other ways. Lendmire does not quote pricing here, but the loan estimate you receive will show the trade-off.
Two limits matter:
- In Texas, a cash-out on the homestead is capped by the state constitution, and the wholesale lane is not written there.
- It is not a universal option. A borrower who misses the score, ratio, loan type or occupancy test falls back to the 80% standard.
The question to ask is whether the borrower’s time in the home makes paying for insurance relief through the loan’s cost worthwhile. A shorter stay changes that answer.
When Does the General Rule Break?
Several situations change the answer. Each has a named rule behind it.
- Seasoning. The loan being paid off must be at least 12 months old, measured from note date to note date, under Fannie Mae’s announcement SEL-2023-01. The clock restarts with each new note. At least one borrower must also have been on title for six months.
- Title exceptions. Delayed financing, inheritance and legal awards (including divorce) waive the six-month title wait. Delayed financing is still treated as cash-out, so cash-out limits apply.
- HELOCs and second liens. A lien of any age can be paid off in a cash-out. The 12-month test applies to the first mortgage only. Combined LTV counts any subordinate lien that stays in place.
- Multi-unit homes, second homes, investment property. Leverage drops to 75% on cash-out. If your home is a rental, occupancy decides the leverage, and that is the end of the discussion here.
- High-balance loans. Insurance is required above 80%. If the premium is financed, the gross LTV after adding it cannot exceed 95%, per Fannie Mae’s guide.
- Manufactured homes. Single-width manufactured homes are not eligible for cash-out under Fannie Mae’s matrix.
- Jumbo. Above the conforming limit, jumbo lanes take over with their own score, leverage and ratio rules.
- Reserves. Fannie Mae requires reserves on cash-out files where the DU casefile shows a debt-to-income ratio above 45%.
What About Insurance You Already Have?
You may not need to refinance to drop it. Under the Homeowners Protection Act, you can ask your servicer to cancel PMI when the balance is scheduled to reach 80% of the home’s original value. The CFPB explains the conditions:
- The request must be in writing.
- You must be current, with a good payment history.
- There can be no junior liens.
- You may need to show the home’s value has not declined.
At 78%, servicers must end it automatically. That is the common mix-up. At 80% you must ask. At 78% it happens on its own. These rules cover single-family principal residences closed on or after July 29, 1999.
FHA insurance is not PMI and these cancellation rights do not apply to it. Moving from FHA to conventional can shed it, but only if the new loan lands at 80% or below, or you accept PMI on the new loan.
What Does This Look Like for a Borrower?
Picture a homeowner with a conventional loan who wants cash for repairs. The home appraises well. The new loan, including payoff and closing costs, comes in at or below 80% of value. No insurance appears in the payment.
Now picture the same homeowner after a low appraisal. The 80% ceiling shrinks. Less cash is available, or the loan no longer fits. Taking more cash is not possible without moving to a product with different rules.
Another borrower has an FHA loan. A cash-out to 80% still carries an upfront premium, which can be financed, plus the annual premium. The monthly budget changes. VA borrowers see a funding fee at closing and no monthly insurance line.
A short checklist helps before applying:
- Payoff statements for every lien on the property.
- Income and asset documents.
- The note date on your current loan.
- The date you took title.
- Whether you plan to stay long enough for the cost trade-off to matter.
Ask your lender which product your file is, what insurance or fee applies, and where any trade-off appears on the Loan Estimate.
Common Myths
- “Cash-out always carries PMI.” Not at or below 80% on a conventional loan.
- “FHA insurance is the same as PMI.” FHA premiums are set by HUD and follow different rules.
- “FHA cash-out goes to 85%.” That ended in 2019.
- “VA means no cost.” The funding fee applies unless waived.
- “A streamline works for cash-out.” Both the VA IRRRL and FHA Streamline are no-cash-out products.
- “I can cash out right after a refinance.” The 12-month rule resets with each note.
- “PMI drops off automatically at 80%.” You must ask at 80%. Automatic ends come at 78%.
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
Do I pay mortgage insurance on a conventional cash-out refinance?
Usually not. The cap is 80% LTV on a one-unit home you live in, and insurance starts above 80%. Lendmire’s piece Do You Pay Mortgage Insurance on a Cash-Out Refinance? walks through the cases.
Does FHA cash-out always carry mortgage insurance?
Yes. FHA charges an upfront premium of 1.75% of the base loan and an annual premium, with limited exceptions for older Streamline and Simple Refinances. Reaching 80% equity does not remove it.
Can I go above 80% with no mortgage insurance?
Only in a narrow wholesale lane. It reaches 89.99% LTV with a 680 score, a 50% ratio ceiling, a thirty-year fixed rate, a primary residence and a conforming balance. It is not written for Texas homestead cash-outs. Subject to lender guidelines.
How soon can I cash out after a refinance?
The loan being paid off must be at least 12 months old, note date to note date. One borrower must also have been on title for six months unless an exception applies, such as inheritance or a legal award.
Can I remove PMI without refinancing?
Often yes. You can request cancellation in writing at 80% of the original value if you are current, have no junior liens and value has not declined. Servicers must end it automatically at 78%.
Taking the 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. You can start with Lendmire’s cash-out refinance programs page.
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.
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References
1. Fannie Mae Selling Guide B7-1-01, Provision of Mortgage Insurance
2. Fannie Mae Eligibility Matrix
4. HUD Mortgagee Letter 2023-05
5. VA News
6. Fannie Mae’s announcement SEL-2023-01
8. CFPB
This article is part of Lendmire’s Refinance series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: Cash Out Refinance Duplex Home · Should a Homeowner Take the Maximum Cash on a Cash-Out Refinance? · Cash Out Refinance Duplex
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.