The Quick Read: A cash-out refinance can end PMI, but only when the new loan lands at or below 80% of your home’s appraised value, or through the one wholesale no-mortgage-insurance lane that reaches 89.99%. The old loan’s PMI ends when that loan is paid off. Which provider is best depends on your credit, equity, and goals, so this guide covers what decides the outcome instead of ranking companies.
Key Terms Defined
PMI (private mortgage insurance): A monthly charge on a conventional loan when you owe more than 80% of the home’s value.
LTV (loan-to-value): Your loan balance divided by the home’s appraised value, shown as a percentage.
Cash-out refinance: A new, larger mortgage that pays off your old one and hands you the difference in cash.
Seasoning: The minimum time a loan or ownership must exist before you can refinance it.
Note date: The date you signed the loan paperwork, not the date you made your first payment.
Wholesale lender: A lender that funds loans through brokers instead of selling directly to the public.
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.
Does a Cash-Out Refinance Actually Remove PMI?
Yes, when the math works. The new loan pays off your old first mortgage, and any PMI on that old loan ends with the payoff. Whether the new loan carries PMI depends on its LTV.
Mortgage insurance is required on a conventional first mortgage above 80% LTV on the agency path, with the one exception of a wholesale no-MI cash-out lane that reaches 89.99% with no mortgage insurance (details below). Fannie Mae’s Selling Guide says so, and Freddie Mac’s Guide matches it. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Conventional cash-out loans cap at 80% LTV on a one-unit primary residence, and at 75% on two- to four-unit primary residences, second homes and investment property. So a standard cash-out on a one-unit home stays at or under the line where PMI starts. You avoid PMI because of the cap, not because cash-out has some special power.
Here is the catch. Dropping PMI through a cash-out refinance usually costs more than the other routes, because a cash-out is built to give you cash. If PMI is your only goal, compare the other routes first.
Cancel, Rate-and-Term, or Cash-Out? A Quick Comparison
| Route | Replaces your loan? | Gives you cash? | Main tradeoff |
|---|---|---|---|
| Cancel PMI with your servicer | No | No | Needs 80% of original value or an appraisal |
| Rate-and-term (limited cash-out) refinance | Yes | Only incidental | Closing costs; PMI stays above 80% |
| Cash-out refinance | Yes | Yes | Bigger balance; borrowing against equity |
Many homeowners assume refinancing is the only exit. It is not. The CFPB explains that you can ask your servicer to cancel PMI when your balance is scheduled to reach 80% of the home’s original value. Extra principal payments can get you there sooner. The servicer may ask for proof of no junior liens and evidence the value hasn’t dropped, such as an appraisal.
Under the Homeowners Protection Act, the servicer must terminate PMI automatically at 78% of original value. At 80% you usually have to ask. Cancellation costs nothing like a new loan does.
How a Cash-Out Refinance Is Underwritten, Step by Step
Across the wholesale programs Lendmire places files with, the sequence looks the same. Knowing it helps you spot where a file can stall.
1. Confirm what’s being paid off. The new loan pays off your existing first mortgage. Agency cash-out rules don’t restrict how you use the proceeds, and the loan can even go on a home you own free and clear.
2. Classify the transaction. A limited cash-out refinance caps the cash you get back. Fannie Mae’s cap is the lesser of 2% of the new loan amount or $2,000. Freddie Mac’s is the greater of 1% of the new loan amount or $2,000. Anything beyond that is a true cash-out loan with tighter leverage.
3. Check seasoning. The first mortgage being paid off must be at least 12 months old, note date to note date. Freddie Mac uses the same 12-month measure. You also need a borrower on title for six months. Exceptions exist for delayed financing, inheritance, and legal awards.
4. Order the appraisal and test the LTV. The new loan amount divided by appraised value must fit the cap. That is 80% for a one-unit primary residence, and 75% for two- to four-unit primary residences, second homes, and investment property. Occupancy sets the leverage.
5. Underwrite the file. The lender reviews credit, income, assets, and debts. Most files run through an automated finding. Wholesale conventional programs start at a 620 decision score, with a 50% total ratio ceiling. Manually underwritten loans use 36% or 45% with the reserve and score factors in the agencies’ Eligibility Matrix.
6. Close. The new loan pays the old one. You receive the remaining cash. Your Loan Estimate and Closing Disclosure show the costs before you sign.
Every figure here is subject to lender guidelines and full file review. Nothing is a commitment to lend.
What Decides the Outcome
Five things drive it: appraised value, the LTV cap for your occupancy and unit count, seasoning on the loan you’re paying off, credit and debt ratios, and whether you’d end up with monthly mortgage insurance anyway.
A low appraisal can be an unwelcome surprise. It shrinks the room under the cap, and that room is both your cash and your PMI exit. Financed closing costs also eat into the same room. Every dollar rolled into the balance counts toward LTV.
The One Exception: The Wholesale No-MI Lane
One wholesale lane 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 loan balance. It carries its own six months of seasoning. It is not written in Texas. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
For a borrower sitting at 85% or 88% of value, this lane can change the picture. Under standard agency rules, that leverage means PMI. Here it does not. Not every lender writes it, and that is where a broker earns its keep.
Who Writes These Loans, and How Do You Pick?
This article won’t rank lenders. Any “top five” list would be guesswork, because the best program for your situation depends on your credit profile, property type, leverage need, and documentation. The lenders that write this loan well depend on the same things.
Lendmire is a mortgage broker, not a lender. It works with a network of wholesale cash-out refinance lenders and matches your scenario to the program that fits. Here is how the provider types differ in practice:
- Retail lenders and banks offer their own products only. You see one set of guidelines.
- Credit unions may offer their own terms, often to members only.
- Brokers shop several wholesale lenders at once, which matters when your file sits near a leverage line or needs the no-MI lane.
Whichever route you take, compare the full terms on each Loan Estimate, not just the monthly payment. Ask how closing costs are handled, whether they’re financed, and whether mortgage insurance applies. You can see how Lendmire frames its cash-out refinance programs on its program page.
A Worked Example
Say you bought a home with 5% down on a standard purchase. You’ve paid the loan down and the home has gained value. Your balance now sits at about 70% of today’s appraised value, and you want cash for a renovation. Everything here is subject to the lender’s guidelines and a full file review.
A conventional cash-out up to 80% leaves you room to borrow. Your old PMI ends at payoff. The new loan carries no PMI because it stays at or under 80%. But suppose you roll closing costs into the balance and take a large amount of cash. Now the new loan edges toward 80%, and the cap limits what you can pull.
Now flip the scenario. Your balance is scheduled to reach 80% of the original value and you want no cash. A servicer cancellation request likely beats a refinance. You skip closing costs entirely.
When Cash-Out Is the Wrong Tool
Skip it if you only want PMI gone. A rate-and-term refinance or a servicer request is cheaper in most cases. Skip it if your loan is under 12 months old and you don’t qualify for an exception.
Think twice if the new loan’s principal and interest would outweigh the PMI you save. The larger balance may cost you more each month than the PMI line did. A cash-out turns home equity into debt. You are borrowing against the house, not removing PMI for free.
Also keep in mind that FHA mortgage insurance and VA funding fees work differently from PMI. Fannie Mae’s consumer page notes that exiting FHA mortgage insurance can be more complicated and may involve refinancing into a conventional loan. That’s a separate conversation. Lendmire’s piece on VA cash-out refinance providers covers the VA side.
Edge Cases That Change the Answer
- Delayed financing. If you bought with cash, both agencies allow an exception to seasoning, with documented funds and an arm’s-length purchase.
- Co-owner buyout. Buying out a co-owner under a written agreement counts as limited cash-out at both agencies.
- Texas homestead. A cash-out on a Texas homestead is a Section 50(a)(6) loan, capped at 80% of the home’s value by the state constitution.
- PACE or energy-retrofit liens. These can block a sale to Freddie Mac and change how a refinance is classified.
- Credit events. The agencies set waiting periods: four years from a chapter 7 discharge, seven from a foreclosure, and four from a short sale or deed-in-lieu. Documented extenuating circumstances can shorten them.
- High-LTV refinance. The agencies have suspended some high-LTV refinance options. Don’t count on one.
- Second homes and rentals. Occupancy sets the leverage, at 75% for these properties on a cash-out.
Your Application Checklist
1. Check your balance against your home’s likely value to estimate LTV. 2. Confirm the note date on your current loan is at least 12 months back. 3. Confirm you’ve been on title for six months. 4. Pull your credit and know your score against the 620 floor (680 for the no-MI lane). 5. Decide how much cash you actually need. 6. Ask a broker to compare programs, including the no-MI lane if your leverage runs high. 7. Compare each Loan Estimate line by line.
If you’re weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches.
Frequently Asked Questions
Does PMI on my old loan block a cash-out refinance?
No. The new loan pays off the old one, and PMI on the old loan ends with the payoff. What matters is the new loan’s LTV, seasoning, and your credit.
If I take cash out, does PMI come back?
It can, depending on the loan path. On the agency path, mortgage insurance is required above 80% LTV. A standard conventional cash-out caps at 80% on a one-unit primary residence, so it stays under that line. The wholesale no-MI lane is the exception, reaching 89.99% with no mortgage insurance. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Do financed closing costs shrink my cash-out room?
Yes. Costs added to the balance count toward LTV, so they reduce the cash you can take under the cap. Paying them out of pocket preserves more room.
What happens if the appraisal comes in low?
The cap applies to the lower value, so your maximum loan shrinks. You may get less cash, or you may need to pay down the balance to keep the file at the same leverage. Some borrowers switch to a servicer cancellation request if cash isn’t essential.
Can I cash out a loan I just refinanced?
Usually not right away. The loan being paid off must be at least 12 months old, note date to note date, with exceptions for things like delayed financing, inheritance, and legal awards.
For your own numbers, request a scenario review with Lendmire.
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 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. Fannie Mae Selling Guide B7-1-01
3. CFPB
4. Freddie Mac cash-out refinance product page
5. Fannie Mae: Private mortgage insurance
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 Avoid PMI on a Conventional Cash-Out Refinance · How a Conventional Cash-Out Refinance Resets Your Loan Term · Best Cash-Out Refinance Program to Get Rid of PMI on the Current 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.