How to remove PMI from your mortgage

Get rid of mortgage insurance on FHA and Conventional loans

When homeowners are paying for mortgage insurance, they often want to know how to remove it from their monthly payments. Your choices for removing mortgage insurance are different, depending on the kind of mortgage you have.

FHA loans have mortgage insurance premiums (MIP) and Conventional loans have private mortgage insurance (PMI). They sound the same, but the rules for removing them are different. Read on to learn more!

How to remove mortgage insurance premiums (MIP) from an FHA loan

FHA loans are mortgages offered by private lenders and backed by the Federal Housing Administration (FHA). Every homeowner who gets an FHA loan is required to pay an upfront MIP, as well as annual MIP.

If you made a down payment of 10% or more on your most recent FHA loan, you need to pay MIP for 11 years. If you made a down payment of less than 10%, you are required to pay MIP for the full term of the mortgage. The rules for MIP are different for FHA loans that closed before June 3, 2013. You can find details about the older MIP rules on the HUD website.

The value of your home equity does not affect your FHA MIP, and having 20% in home equity will not allow you to cancel it. As a result, homeowners with FHA loans sometimes think about refinancing with a Conventional loan to remove MIP.

One way you can do this is to refinance your FHA loan to a conventional mortgage. As discussed above, you'll need to have at least 20% in home equity when you refinance with a Conventional loan, or you will need to pay for PMI. Be sure to check the value of your home equity before considering this refinance option.

Also, compare the closing costs you will pay against the costs of continuing to pay MIP. According to Freddie Mac, the average closing costs of mortgage refinances are approximately $5,000 though these costs may vary depending on state and loan amount. You’ll want to make sure that paying these costs makes sense for you. Refinancing might also allow you to lower your interest rate, in addition to getting rid of MIP. Keep in mind that, by refinancing, the total finance charges you pay may be higher over the life of the loan.

How to remove private mortgage insurance (PMI) from a Conventional loan

Many homeowners have Conventional loans, often called "traditional mortgages" or simply "mortgages." When you buy a house with a Conventional loan, you will need to pay for PMI unless you make a down payment of at least 20%. The same is true when you refinance. Your home equity needs to be at least 20%, or you will need to pay for PMI.

The good news is that you can request that your lender remove PMI once the principal balance of your loan reaches 80% of the original value of the property. To request removal, you will need to submit a request, in writing, to your lender. You also, need to be current on your loan and have a good payment history to get your cancellation request approved.

Wait for automatic removal of PMI

Your lender is required to remove PMI from your mortgage when the principal balance of your loan reaches 78% of the original value of the property. If you don’t ask your lender to get rid of your PMI when your principal balance reaches 80% of the original home value, they must automatically remove it for you once it reaches 78%. You will need to be current on your loan to be eligible for automatic termination of PMI.

Refinancing to remove PMI

You may not be able to remove PMI by refinancing unless you have at least 20% equity in your home. The rules for removal of MIP are different for FHA loans and refinancing to a Conventional loan may be your only option for removing MIP with that loan scenario.

Freedom Mortgage is a top FHA lender in the United States according to Inside Mortgage Finance, 2023.

Last reviewed and updated January 2024 by Freedom Mortgage.