Conventional Loan Refinance Options
A conventional loan refinance can lower your rate, change your term, take cash from your equity or remove private mortgage insurance. The right option depends on your equity, credit, goals and how long you will keep the home. This hub explains each path and links to the detailed guides.
Key Takeaways
- A rate-and-term refinance changes the rate or term without meaningful cash out.
- A cash-out refinance on a primary residence is generally limited to about 80% loan-to-value.
- Reaching 80% loan-to-value can remove PMI, either by refinancing or by asking your servicer to cancel it.
- Most conventional refinances start at a 620 credit score, and higher scores generally improve pricing.
What are my conventional refinance options?
Rate-and-term refinance
You replace your loan to lower your rate, shorten or lengthen your term, or move from an adjustable rate to a fixed rate. You do not take meaningful cash out. Read the full guide on rate-and-term refinance and the program page on how to refinance a conventional loan.
Cash-out refinance
You replace your loan with a larger one and receive the difference in cash. A conventional cash-out refinance is generally limited to about 80% of your home’s value on a primary residence, and lenders may set lower limits for second homes and investment properties. See cash-out refinance and the program guide on conventional cash-out refinances.
Refinance to remove PMI
If you have PMI and your home has gained value or your balance has dropped, you may be able to refinance into a loan with no PMI. You may also be able to ask your servicer to cancel PMI without refinancing. The PMI guide explains removal rules, including the 80% request point, automatic termination at 78% of the scheduled balance, and final termination at the midpoint of the loan term.
Refinance from FHA to conventional
If you hold an FHA loan and have built about 20% or more equity, a conventional refinance can remove FHA mortgage insurance. Compare costs with the FHA vs. conventional guide.
Jumbo and high-balance loans
If your balance is above the conforming limit for your county, you may need a jumbo loan. California limits vary by county, so use the loan limit lookup. Related guides: conforming vs. high-balance and jumbo loan refinance.
How do the options compare?
| Goal | Usual path | What to check |
|---|---|---|
| Lower payment or rate | Rate-and-term | Break-even, term reset, closing costs |
| Pay off sooner | Rate-and-term with a shorter term | Higher payment you can afford |
| Cash for repairs, debt or other uses | Cash-out | 80% LTV limit, new rate on whole loan, risk to your home |
| Cancel PMI | Refinance or PMI removal request | New appraisal, seasoning, cost of removal vs. refinancing |
| Escape an adjustable rate | Rate-and-term to fixed | Rate at reset vs. new fixed rate |
What do I need to qualify?
- Credit: most conventional loans require at least a 620 score.
- Equity: 20% equity avoids PMI. Cash-out leaves you with about 20% equity.
- Debt-to-income: commonly up to about 45%, and up to around 50% with strong factors.
- Seasoning: conventional cash-out generally needs 6 months on title and an existing first mortgage that is at least 12 months old. See when you can refinance.
- Appraisal: usually required, with exceptions for some waiver cases. See using a new appraisal.
Which comes first, the numbers or the loan?
Start with the numbers. Use the break-even calculator, review the costs of refinancing, and check how much you could save. Then pick the structure. The full chapter is on the refinancing a home page.
At Lendia, we help you choose the right conventional refinance
At Lendia, we compare conventional refinance options from multiple lenders and match them to your goal and your time horizon. Contact us or get a rate quote now.
Frequently Asked Questions
How much equity do I need for a conventional refinance?
It varies by goal. Rate-and-term refinances can work with less equity, while cash-out generally leaves you at or below 80% loan-to-value.
Can I refinance a conventional loan to remove PMI?
Yes, if your equity is high enough. Ask also about canceling PMI on your current loan, which may cost less.
Does a conventional refinance need an appraisal?
Usually, but some eligible loans receive an appraisal waiver. The automated system decides.
Are there prepayment penalties on conventional loans?
They are uncommon. See do conventional loans have prepayment penalties.
Rates and terms depend on your situation; approval requires qualification.
Talk to a Licensed Lendia California Loan Officer
At Lendia, we review your situation and show you the programs you qualify for.