When Does Mortgage Insurance Go Away?

What mortgage insurance is and why it exists

Mortgage insurance protects the lender, not you. When you put down less than 20%, the lender is carrying more risk, because there is less of your own money in the home to cushion a default. Mortgage insurance covers part of that risk, and you pay for it, usually as part of your monthly payment. It is not a tax, and it is not homeowners insurance. It is a premium for the lender's protection, and it is one of the costs that makes a lower down payment possible in the first place.

Because it protects the lender, mortgage insurance is tied to your equity, which is the difference between what your home is worth and what you owe. As your equity grows, the lender's risk shrinks, and at a certain point the insurance is no longer needed. That point is where the two big loan types diverge. The CFPB's plain-language explanation of mortgage insurance covers the basics, and this guide covers when each kind drops off.

Conventional loans: when PMI comes off

On a conventional loan, private mortgage insurance, PMI, is typically removed once your equity reaches about 20% of the home's value, which is an 80% loan-to-value. The Homeowners Protection Act sets two important milestones:

• You can request cancellation once your principal balance is first scheduled to reach 80% of the home's original value. The servicer must cancel once you satisfy the requirements, which generally means being current on payments and providing evidence like confirming there is no second mortgage.
• PMI terminates automatically once your balance is scheduled to reach 78% of the original value, as long as you are current on payments. You do not have to do anything, though it never hurts to confirm with your servicer.

Two details matter here. First, those milestones are based on the original value of the home, not today's market value, unless your lender agrees to use a new appraisal (more on that below). Second, lenders' exact rules vary on top of the law: some require you to ask in writing, some want a certain payment history, and some accept different evidence. The honest answer is that you often must ask, and the CFPB's guide to PMI removal walks through the request step by step.

FHA loans: MIP and a very different set of rules

FHA loans come with their own mortgage insurance, called the mortgage insurance premium, or MIP, and it works differently from conventional PMI. It has two parts: an upfront premium, typically 1.75% of the loan amount, and an annual premium that is built into your monthly payment. Whether the annual premium ever comes off depends on when the loan started and how much you put down.

For FHA loans with a case number assigned on or after June 3, 2013, the general rule has been: put less than 10% down and the annual MIP lasts for the life of the loan. Put 10% or more down and the annual MIP is removed after 11 years. Loans that started before that date followed different rules, and FHA has changed its premiums and cancellation rules over time, so the current rules and your loan's start date decide your situation. The HUD summary of the FHA premium structure is the current, primary source to check.

The practical difference is real. On a conventional loan, PMI is a visitor that leaves when your equity arrives. On many FHA loans, MIP is a resident for the full loan term. That is why the FHA-versus-conventional choice is often partly a mortgage insurance question, and why the equity math of a conventional loan can look better over a long hold. It is also why refinancing out of FHA MIP is such a common move, which we cover in the FAQ below.

How you can speed it up or plan for it

You cannot force mortgage insurance off a loan before the rules allow it, but you can move the timeline in three practical ways. None of these is a guarantee, and each one depends on the current rules for your loan, so treat them as planning tools, not promises.

Make extra principal payments

Every extra dollar of principal lowers your balance faster and moves you toward the loan-to-value where PMI comes off. Even a modest monthly extra payment can shave years off the timeline on a conventional loan. Just confirm with your servicer that the extra payment is applied to principal, and check whether your loan allows it without a prepayment penalty, though most do not have one.

Refinance when it makes sense

Refinancing into a conventional loan can replace lifetime FHA MIP with conventional PMI, or eliminate mortgage insurance entirely if your equity is at 20%. It only makes sense when rates and your qualification support it and the new closing costs are worth the monthly savings. That is a math question about your break-even point, not something anyone can promise in advance. If the numbers line up, the guide on when refinancing makes sense walks through the decision.

Get an appraisal if your home's value rose

If your home has gained value, an appraisal can show your loan-to-value based on the current value instead of the original purchase price, which may put you over the 20% equity line sooner. Lenders set their own rules for when an appraisal is accepted for PMI removal, so ask whether it applies to your loan before you pay for one. The same idea can work when you are trying to refinance out of FHA MIP, since a higher valuation means more equity on paper.

Key takeaways

• Conventional PMI can be removed once you reach about 20% equity: request it at an 80% loan-to-value, and under the Homeowners Protection Act it terminates automatically at 78%.
• FHA MIP is different: on many newer loans with less than 10% down, the annual premium lasts for the life of the loan; with 10% or more down, it can drop off after 11 years.
• Your loan's start date, down payment, and program rules decide your situation, and those rules have changed before, so they must be verified as current for your loan.
• Extra principal payments, a refinance that makes sense, or an appraisal when value has risen can move the timeline, but each depends on the numbers and the lender's rules, not a guess.

Frequently asked questions

Can I cancel PMI early?

Yes, in two senses. Under the Homeowners Protection Act you can request cancellation once your balance is scheduled to reach 80% of the original value, and some lenders also accept an appraisal of current value to cancel earlier if your home has appreciated. You generally need to be current on payments and provide the evidence your servicer asks for. The specifics are your lender's, so ask what their process requires before you count on a date.

Does refinancing remove FHA MIP?

Refinancing into a conventional loan can remove FHA MIP, and if your equity is at 20% the conventional loan may not carry mortgage insurance at all. Refinancing into another FHA loan does not remove MIP, because the new FHA loan comes with its own premium. Refinancing also has its own costs, so the decision comes down to whether the savings beat the closing costs within the time you plan to keep the loan. There is no guarantee a refinance will be offered or improve your situation; the numbers have to support it.

How do I know if my FHA loan has life-of-loan MIP?

Two factors decide it: when the loan started and how much you put down. For FHA loans with a case number assigned on or after June 3, 2013, less than 10% down generally means the annual premium lasts for the life of the loan, while 10% or more down means it can be removed after 11 years. Your loan documents and your servicer can confirm the details for your exact loan, and current HUD rules are the authority.

Primary sources

• CFPB: When can I remove private mortgage insurance (PMI) from my loan?
• CFPB: What is mortgage insurance and how does it work?
• HUD: Single Family Mortgage Insurance Premiums (FHA MIP)
• HUD Answers: FHA Mortgage Insurance Premium structure for forward mortgage loans
• Freddie Mac: Down payments and PMI
• Fannie Mae: What you need to know about down payments