How to Remove PMI Without Refinancing
If you are paying private mortgage insurance and someone has suggested refinancing to get rid of it, pause before you start comparing offers. For many mortgages the premium comes off the loan you already have, on a schedule federal law already sets, and the request itself is free. The only cost that can arise is an appraisal, if your servicer asks you to show the property has not lost value. Refinancing to escape PMI is sometimes the right move, but it is the expensive answer to a question that usually has a much cheaper one.
The rules below are the ones the Consumer Financial Protection Bureau sets out, and they describe the legal requirements that apply to mortgages for single-family principal residences that closed on or after 29 July 1999. If your loan is older than that, or the property is not your principal residence, the protections may not apply and your servicer is the party to ask.
There Are Two Separate Rights, With Two Different Triggers
Almost every confused conversation about PMI comes from treating this as one rule. It is two, they fire at different moments, and only one of them is something you do.
- YOUR right to ask. You can ask your servicer to cancel PMI on the date your principal balance is scheduled to fall to 80 percent of your home's original value. You can also ask earlier than that scheduled date if extra payments have already brought the balance down to 80 percent.
- YOUR SERVICER's duty to act without being asked. Even if you never ask, your servicer must generally terminate PMI automatically on the date your principal balance is scheduled to reach 78 percent of the original value. You do still need to be current on your payments for that to happen on the scheduled date; if you are behind, termination waits until shortly after your payments are brought up to date.
The word doing the work in the second rule is SCHEDULED. Automatic termination is keyed to the date your amortization schedule says the balance will hit 78 percent, not the date extra payments actually get it there. Paying extra principal accelerates the date you can ASK at 80 percent; it does not move the automatic cutoff. Two rights, two triggers, and only one of them rewards paying ahead.
There is a third, quieter backstop. If you are current on your payments but the balance has still not reached either threshold, your lender or servicer must end the PMI the month after you reach the midpoint of your loan's amortization schedule, which is simply halfway through the loan's original full term.
What Original Value Means, and the Assumption That Trips People
Both thresholds are measured against your home's original value, and that phrase has a specific meaning. It generally means the contract sales price or the appraised value of the home at the time you purchased it, whichever is lower. If you have refinanced since, the original value is the appraised value at the time you refinanced.
This is where the common advice goes wrong. You will read that if your home has appreciated, you can order an appraisal and have PMI removed on the strength of the new, higher value. That is not what the federal rules described here provide. The thresholds are measured against original value, and an appraisal appears in these rules for the opposite purpose: as evidence that your property's value has not DECLINED below the original value. If it has declined, you may not be able to cancel on schedule at all.
Appreciation is not irrelevant, it is simply governed by something else. Loan investors, including Fannie Mae and Freddie Mac, often create their own PMI cancellation guidelines, and by rule those guidelines cannot be less favourable to you than the federal ones above, only more. An investor guideline is therefore a possible extra route out, never a reason you are stuck for longer. Whether yours offers one based on a current appraised value is a question for your servicer: ask which investor holds your loan and what its guidelines say. Nobody can tell you that from the outside, including us.
What You Need in Place Before You Ask
Your servicer is legally required to grant this request as long as you meet the criteria below, so this is an entitlement rather than a favour you are asking for. It is not unconditional, though. You generally need all four of the following, whether you are asking on the scheduled date or earlier.
- A request made in writing. This is one of the four legal conditions rather than a formality, and an oral request does not trigger the servicer's duty to grant.
- A good payment history, and to be current on your payments. Both halves matter, because a clean record last year is not the same as being current today, and this is usually the condition you can put right before you ask.
- The ability to certify that there are no junior liens on the home, such as a second mortgage.
- Evidence, for example an appraisal, that the property's value has not fallen below the home's original value.
Put the request in writing to your servicer, keep a copy, and note the date. If the answer is no, ask which of those four conditions was not met, because that turns a refusal into something you can act on rather than something you have to accept.
Loans These Rules Do Not Govern
Two categories fall outside what is described above, and confusing them with a conventional loan is how people end up believing PMI can never come off.
- Mortgages through the Federal Housing Administration or the Department of Veterans Affairs have different requirements. If yours is an FHA or VA loan, your servicer is the party to ask about mortgage insurance on it.
- Arrangements where the lender rather than the borrower pays the mortgage insurance are structured differently, and the cancellation rules above are not the ones that apply.
When Refinancing Genuinely Is the Answer
Having said all of that, there are situations where a new loan really is the route rather than a request. FHA and VA loans work under different requirements, so if yours is one, ask your servicer what applies before assuming either way. A lender-paid arrangement is a clearer case, because there is no premium of yours to cancel. And occasionally it is the case that your equity has grown well past the thresholds and your servicer has confirmed your investor's own guidelines offer no route on the current value. Ask that question before treating a refinance as the answer, because the answer is often yes.
In each of those, the decision is the same comparison every refinance comes down to: what the transaction costs against what it saves, and how long you would need to keep the new loan for one to exceed the other. Removing a premium is a real saving and belongs in that arithmetic, but it does not change how the arithmetic works.
RefiSolutions is a referral service, not a mortgage lender, servicer or bank. We cannot cancel your mortgage insurance, tell you which investor holds your loan, or make a determination about your particular mortgage — those answers come from the servicer you already pay. What we can do, if you get to the point where a new loan is genuinely the better route, is connect you with licensed professionals who can price it.