The Quick Read: It depends on the loan program. On a conventional cash-out refinance, the answer is no, because Fannie Mae makes a cash-out loan ineligible if it includes financed borrower-paid mortgage insurance, and the 80% leverage cap usually leaves no insurance to roll in anyway. On FHA, the upfront premium can be financed. On VA, the one-time funding fee can be financed, and there is no monthly mortgage insurance. Every figure here is subject to lender guidelines and full file review.
Why Conventional Cash-Out Says No
The conventional answer is a firm no, and the reason is built into the loan design. Fannie Mae’s Selling Guide lists cash-out refinances as ineligible for delivery when they carry financed borrower-purchased mortgage insurance. Lender-paid mortgage insurance can’t be added to the loan amount either. Lendmire’s cash-out refinance programs for a home you live in work inside that rule.
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: 7.40% as of October 15, 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.
Here is the second layer. Conventional mortgage insurance is tied to equity below 20%. At 80% or less, there is generally no insurance to roll in. That is an inference from the cap and how the insurance works, not a line quoted from either guide.
Borrowers ask how to fold the insurance into the new balance. The better question is whether the loan lands at or under the leverage cap, because that decides whether insurance exists at all.
The One Conventional Exception: Limited Cash-Out
Financed mortgage insurance is allowed on one conventional refinance type, the limited cash-out refinance, also called rate-and-term. It requires a one-unit principal residence or second home. The loan amount, including the financed premium, can’t exceed the conforming loan limit.
A refinance pays off the existing first mortgage, the closing costs and a purchase-money second lien. It allows only incidental cash back. Leverage can reach 95% on a one-unit principal residence, and 97% where the existing loan is agency-owned and the first-time-buyer program allows it. Mortgage insurance applies above 80%.
So the “yes” on conventional is real, but it is not a cash-out. If your goal is meaningful cash in hand, this lane doesn’t deliver it.
Does FHA Let You Finance the Premium?
Yes. FHA is the genuine “yes” for cash-out. HUD’s FHA Q&A explains that FHA charges an upfront premium at closing plus an annual premium collected in monthly installments. The upfront premium is 1.75% of the base loan amount on purchase, refinance and Streamline loans. A narrow exception exists for Streamline or Simple Refinances of FHA loans endorsed on or before 05/31/09.
Two points trip borrowers up:
- Financing the premium raises your balance, not your cash. The premium sits on top of the base loan. It grows what you owe without handing you more equity.
- The monthly premium stays. Financing the upfront piece does nothing to the annual premium, which keeps arriving in the payment.
How the financed premium interacts with FHA’s 80% cash-out test is a detail to check in HUD’s Handbook 4000.1 index and to confirm with the broker before you plan around the cash figure. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
An FHA Streamline isn’t a cash-out at all. It refinances an existing FHA loan with limited credit review and, in the no-appraisal version, no new valuation. It never pulls equity out.
What About VA Loans?
VA loans carry no monthly mortgage insurance. They carry a one-time funding fee, and that fee can be financed. VA lists the cash-out refinance funding fee at 2.15% for first use and 3.3% after first use, and says refinance fee levels don’t change with down payment. Certain borrowers are exempt, including those receiving VA disability compensation.
The VA streamline refinance, formally the Interest Rate Reduction Refinance Loan (IRRRL), is built for borrowers who already have a VA loan. VA News puts its funding fee at 0.5% and notes borrowers have flexibility in how they pay it. It is VA-to-VA only and allows no cash out. In the programs Lendmire places files with, it also carries a net tangible benefit test and seasoning of the later of 210 days and 6 payments.
One caution from VA’s own guidance: financing closing costs, points and the funding fee can significantly increase the monthly payment.
Side-by-Side: Who Can Finance What
| Loan type | Insurance or fee | Can it be financed? | Cash out? |
|---|---|---|---|
| Conventional cash-out | PMI generally n/a at 80% | No financed MI allowed | Yes |
| Conventional limited cash-out | PMI above 80% | Yes, within loan limit | Incidental only |
| FHA cash-out | Upfront plus annual MIP | Upfront: yes | Yes |
| FHA Streamline | Upfront plus annual MIP | Upfront: yes | No |
| VA cash-out | One-time funding fee | Yes | Yes |
| VA IRRRL | 0.5% funding fee | Yes | No |
The Real Question: Does the Total Still Fit the Cap?
“Can I roll the insurance in?” is really “does the loan, including the premium or fee, still fit the leverage cap and the loan limit?” The appraisal sets the value. The cap sets how much equity must stay in the house. Anything financed eats into that room.
Picture a homeowner whose cash-out request already lands near the cap. Adding a financed premium or fee pushes the total past it. The options are to take less cash, pay the premium out of pocket, or move to a different program. Taking less cash is the most common fix.
Conventional leverage also shifts by occupancy. A cash-out on a one-unit principal residence is held to 80%. Two- to four-unit principal residences and second homes drop to 75%, per the Fannie Mae eligibility matrix. Occupancy decides the leverage.
A Conventional Route That Avoids Insurance Altogether
The conventional lane isn’t a dead end for borrowers who want more than 80% of the home’s value. Among the wholesale programs Lendmire places files with, one lane reaches 89.99% loan-to-value with no mortgage insurance. It requires a 680 score and a 50% ratio on a thirty-year fixed, primary residence, conforming balance, with its own six months of seasoning. It isn’t written on Texas homesteads, where the state constitution caps cash-out at the agency figure. Exact terms depend on lender and investor guidelines, credit profile, reserves, and property review.
That is a structure to ask about, not an entitlement. Eligibility depends on credit, the property and a full file review. This is not a commitment to lend.
Seasoning and Timing Rules That Block the Plan
Conventional cash-out has seasoning. The first mortgage being paid off must be at least 12 months old, note date to note date, and a borrower must be on title for 6 months. Delayed financing, inheritance and legal-award exceptions exist.
Back-to-back refinances get scrutiny too. Fannie Mae says a transaction isn’t eligible as a limited cash-out if the borrower did a cash-out refinance with a note date 30 days or less before the new application.
Pay It in Cash or Finance It?
Financing keeps cash in your pocket at closing. It costs more over time, because you pay interest on the financed amount for as long as you hold the loan. Paying in cash is cleaner, but it reduces the money the refinance was meant to free up.
A rough decision frame:
1. Finance it if you need every dollar of cash on hand, and the larger balance still fits the cap and the budget.
2. Pay it if you plan to keep the loan a long time, since the interest on a financed amount compounds into real cost.
3. Restructure if the premium is what pushes you over the cap. A smaller cash-out or a different program may avoid it.
Can a Refinance Get You Out of Mortgage Insurance?
Sometimes. Conventional insurance is removable. Under federal rules, as the CFPB explains, you can request cancellation when your balance is scheduled to reach 80% of original value, and the servicer must end it automatically at 78% if you’re current. The request goes in writing, with a good payment history. You may need to certify no junior liens and show the value hasn’t declined.
FHA insurance works differently. The private-insurance cancellation law doesn’t cover it, and ending it can involve refinancing out of the FHA loan, per Fannie Mae’s consumer guidance. The trade-off: a high-leverage conventional replacement can bring private insurance back. A refinance also generally resets the original-value reference to the new appraised value, which restarts the clock on those cancellation milestones.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Key Terms Defined
- Base loan amount: the loan before any financed premium or fee is added.
- Upfront premium: the one-time FHA charge, collected at closing.
- Annual premium: the ongoing FHA charge, billed in monthly installments.
- Funding fee: the one-time VA charge in place of monthly insurance.
- Limited cash-out: a refinance that pays off the existing loan and costs with only incidental cash back.
- Loan-to-value (LTV): the loan balance divided by the home’s appraised value.
Common Misconceptions
- “Insurance always rolls into a refinance.” Not on conventional cash-out.
- “VA loans have mortgage insurance.” They have a funding fee, not monthly insurance.
- “An FHA Streamline can pull cash out.” It can’t.
- “An IRRRL needs an appraisal.” Generally no, and it allows no cash out.
- “Financing it makes it free.” It adds to the balance and the interest paid.
- “Mortgage insurance protects me.” It protects the lender, per the CFPB.
Frequently Asked Questions
Can I roll PMI into a conventional cash-out refinance?
No. Fannie Mae treats cash-out loans with financed borrower-paid insurance as ineligible. At or under 80% leverage there is generally no PMI to finance. Only a limited cash-out refinance can carry financed insurance.
Does an FHA cash-out let me finance the upfront premium?
Yes, the 1.75% upfront premium can be financed. The annual premium still bills monthly. The financed piece raises your balance without increasing cash received.
Is the VA funding fee the same as mortgage insurance?
No. It is a one-time fee that applies to a cash-out refinance, and VA has no monthly mortgage insurance. Some borrowers, such as those receiving VA disability compensation, are exempt.
Will financing a premium or fee increase my cash out?
No. It raises the total balance and the interest you pay on it, but the cash you receive comes from equity. The larger total must also fit the leverage cap and loan limit.
Does refinancing restart my chance to cancel PMI?
Generally, yes. A refinance typically resets the original-value reference to the new appraised value. Cancellation at 80% and automatic termination at 78% then run from that new baseline.
If you are weighing a cash-out refinance on the home you live in against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches. For a related angle, see Lendmire’s piece Cash-Out Refinance Mortgage Insurance Rules and the No-MI Option.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
For your own numbers, request a scenario review with Lendmire.
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References
1. Fannie Mae Selling Guide B7-1-04, Financed Borrower-Purchased Mortgage Insurance
2. HUD FHA Mortgage Insurance Premium Structure
4. VA Funding Fee and Closing Costs
5. VA News funding fee article
6. Fannie Mae Eligibility Matrix
7. Fannie Mae Selling Guide B2-1.3-04, Prohibited Refinancing Practices
8. CFPB
9. Fannie Mae’s consumer guidance
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 Mortgage Insurance Changes a Cash-Out Refinance Payment · Can a Free-and-Clear Homeowner Get a Cash-Out Without Mortgage Insurance? · Does a Cash-Out Refinance Mortgage Need Full Underwriting?
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
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.