How to Remove PMI and Understand FHA Mortgage Insurance

Start by identifying your mortgage insurance

You may be able to remove private mortgage insurance without replacing your mortgage. The available route depends on your loan, the kind of insurance you have and the rules that govern it.

Conventional loans can have private mortgage insurance, or PMI. FHA loans use mortgage insurance premiums, called MIP. These are different from homeowners insurance, which covers specified risks to your property. PMI protects the lender against certain losses if a borrower does not repay the mortgage. CFPB: What is private mortgage insurance?

Review your mortgage statement and closing documents, then ask your current servicer which coverage applies. The servicer is the company that manages your payments; it may be different from the company that originally arranged your loan.

When can conventional PMI end?

For many eligible conventional mortgages with borrower-paid PMI, these are the principal routes. The statutory summary focuses on covered loans for a one-unit primary residence closed on or after July 29, 1999. Older loans, certain high-risk loans, other properties and special loan circumstances can have different rules.

These routes are explained in the CFPB's PMI cancellation guidance. Lender-paid mortgage insurance has different treatment; do not assume it is a separately removable monthly premium or that cancellation will reduce the loan's interest rate.

“Original value” generally means the lower of the purchase price and the appraisal used when you bought the property. Following a refinance, it generally means the appraisal value used for that refinance.

For requested cancellation, you generally must be current on payments and have a good payment history. The servicer may require evidence that the property has not declined below its original value and, where applicable, certification about subordinate liens. Ask which requirements apply to your loan. CFPB: Cancellation requirements

An extra principal payment can help you reach the 80% request threshold sooner. It does not, by itself, move the scheduled 78% automatic-termination date forward. If you have paid down the loan early, ask for a cancellation review instead of assuming the insurance has already ended. CFPB: Homeowners Protection Act guidance

A simple original-value example

Suppose the original value is $500,000:

• 80% is $400,000.
• 78% is $390,000.

If your actual principal balance reaches $400,000, you may be able to request cancellation under the applicable rules. If you pay the balance down to $390,000 early, request review; that payment alone does not establish that the scheduled automatic date has arrived.

These figures illustrate the arithmetic. They do not establish your loan's eligibility.

Can a higher home value help?

Sometimes. A cancellation request using today's value follows the applicable investor's rules and is different from a request based on the home's original value.

For an eligible Fannie Mae loan on a one-unit primary residence, the current-value route generally uses these thresholds:

Qualifying improvements that increased the property's value may allow an exception to the two-year minimum, with an 80% LTV limit. Routine maintenance does not qualify for that exception. Payment-history and approved-valuation requirements also apply. Fannie Mae: Termination of conventional mortgage insurance

For example, a three-year-old loan with a $450,000 balance and a servicer-accepted value of $600,000 has a 75% LTV. That meets this route's ratio threshold, subject to the other requirements. A $480,000 balance on the same accepted value is 80%, which ordinarily would not meet the two-to-five-year threshold.

An online home-value estimate is not an approval. Ask the servicer how it must establish value before paying for an appraisal or other valuation.

How to request a PMI cancellation review

1. Collect your records. Have a recent statement, your PMI disclosure if available, the origination or refinance date, original property value and any records of extra principal payments. If you are relying on improvements, gather dates, descriptions, invoices and permits where relevant.
2. Contact the current servicer. Use the contact information on your statement or its authenticated portal. Ask for its mortgage-insurance cancellation requirements and the correct destination for a written request.
3. Ask which route fits. Request the original-value cancellation date, scheduled automatic-termination date and any available current-value option. Ask which investor's rules apply. If the loan was modified or has an unusual payment history, ask how that affects the review.
4. Confirm the requirements and costs. Ask what payment history is required, whether a valuation is needed, who orders it and what it costs. Ask whether any second mortgage or HELOC affects the requirements. Do not assume every loan uses identical lien conditions.
5. Submit the written request and required documents. Use the servicer's form or requested method and keep a dated copy. A telephone inquiry is useful, but follow through with the written request needed for your cancellation route.
6. Track the decision and the payment change. Ask when the review should be complete and when an approved cancellation would take effect. Continue paying the billed amount until the servicer confirms the change. Check the next statement and automatic-payment settings.

The review can involve payment-history checks and a servicer-approved property valuation; the exact requirements depend on the route. CFPB guidance and Fannie Mae servicing requirements.

For a loan covered by the Homeowners Protection Act's scheduled automatic-termination rule, the servicer cannot require you to pay for a property valuation as a condition of that termination. CFPB: Automatic termination

Sample message to your servicer

Use your servicer's secure portal or designated correspondence process. Fill in the account details it requires there.

Subject: Request to review mortgage-insurance cancellation

I would like a review of whether my mortgage qualifies for cancellation of borrower-paid PMI.

Please confirm the original property value used for this purpose, my current principal balance, the applicable investor guidelines and my scheduled cancellation and automatic-termination dates.

Please also explain whether I can qualify using the property's current value or qualifying improvements. Please identify any payment-history, valuation, documentation or other requirements. Before I order or pay for a valuation, please confirm the required process and cost.

Please provide the decision in writing, including the effective date and revised payment if approved. If I am not eligible, please explain the reason and the requirements or date for a future review.

What if the request is denied or delayed?

Ask for a written explanation identifying the rule, balance, property value or payment-history issue used in the decision. If records are missing or incorrect, supply the relevant documents and ask how to have the decision reviewed.

An unsuccessful current-value request does not necessarily eliminate a future original-value or automatic-termination route. Ask which options remain.

Keep statements and correspondence. If you believe an unresolved servicing issue remains after contacting the company, you can consider the CFPB's mortgage complaint process.

Does FHA mortgage insurance last for the life of the loan?

Often, but not always. FHA's annual MIP is usually collected through monthly payments. For ordinary FHA forward mortgages, the main distinction is the FHA case number assignment date, not simply the date you closed.

For the newer-loan rules, original base LTV excludes financed upfront MIP. Reaching 20% equity later does not trigger conventional PMI cancellation rules. HUD Mortgagee Letter 2013-04.

For eligible older loans with a term longer than 15 years, at least five years of annual MIP payments generally are also required. Older short-term loans have additional historical distinctions. Ask the servicer to confirm the case-assignment date, original LTV and scheduled final MIP payment date. HUD: Monthly premium cancellation and FHA Connection: Final MIP payment date.

Annual MIP and upfront MIP are separate charges. Ending monthly annual-MIP payments does not mean the upfront charge is automatically refunded.

Should you refinance to remove mortgage insurance?

First ask whether insurance can end on your existing mortgage. Refinancing replaces the loan, so compare the new interest rate, closing costs, any new mortgage insurance, repayment period and how long you expect to keep the loan.

Refinancing an FHA mortgage into an eligible conventional loan pays off the old FHA loan, but the new loan may require PMI depending on its terms and LTV. HUD: Ending FHA insurance and CFPB: Conventional PMI.

An FHA streamline remains an FHA refinance and does not automatically eliminate MIP. HUD: FHA streamline refinances and HUD: MIP duration rules.

A smaller monthly payment alone does not establish a lower total cost. A longer term or financed closing costs can change the result. Even a refinance advertised with no closing costs can involve a higher rate or larger loan balance. CFPB: No-closing-cost refinancing.

For help comparing the options, read Thinking About Refinancing?

Keep these three requests separate

Removing mortgage insurance, recasting a mortgage and waiving a tax-and-insurance escrow account address different parts of your mortgage.

A principal reduction may help you qualify for a PMI review. A recast changes the required principal-and-interest payment on an eligible loan. An escrow waiver changes how specified bills are paid. Approval of one does not automatically approve the others.

Your current servicer handles the cancellation request. ECHL can help you compare mortgage options when you are considering whether to keep your existing loan or refinance.