How to get rid of PMI (and FHA MIP): mortgage insurance explained

Mortgage insurance is the line on the payment people hate most, and most of what they’ve heard about it is half right. Here’s how to get rid of PMI on a conventional loan, why FHA’s version plays by different rules, what each one really costs, and when paying it is the smart move.

What is PMI, and who does it protect?

PMI is private mortgage insurance. A conventional loan requires it any time you put less than 20% down, because the loan is more than 80% of the home’s value. It protects the lender, not you. If a loan goes bad and the home sells for less than what’s owed, the insurance company covers part of the lender’s loss. How much depends on the down payment: on a typical 30-year loan, the policy covers 30% of the lender’s claim at 5% down, 25% at 10% down and 12% at 15% down.

Two things it doesn’t do. It doesn’t protect you: if you lose your job, PMI doesn’t make your payment. And it isn’t my choice or yours. Conventional loan rules require it above 80% loan-to-value, the same way your state requires auto insurance.

Each loan program has its own version. FHA calls it MIP, the mortgage insurance premium: similar to PMI with the letters flipped around, and very different rules, covered below. VA loans have no monthly mortgage insurance. Instead there’s a one-time funding fee that can be financed into the loan, and veterans receiving VA disability compensation are exempt; the rates and every exemption are on the VA funding fee page. USDA loans charge a 1% up-front guarantee fee and a 0.35% annual fee for fiscal year 2027, which runs October 2026 through September 2027 (more on USDA loans).

PMI vs MIP: the differences that cost money

The short version: PMI is priced to you, and it ends. MIP is priced to the loan, and with less than 10% down it doesn’t end until the loan does. That one difference drives a lot of the FHA vs conventional decision.

What PMI costs, and what drives the price

PMI is priced to the borrower. On a conventional loan, it’s set by your credit score, your loan-to-value (the down payment) and your debt-to-income ratio. The insurer quotes an annual rate as a percent of the loan, and the monthly cost is the loan amount times that rate, divided by 12.

Here’s what typical rates look like. These come from published 2026 insurer rate cards for standard coverage on a 30-year fixed loan, before any adjustments. They’re typical, not quotes.

Other things move it too. A debt-to-income ratio over 45% adds to the rate, a second borrower on the loan usually lowers it, and cash-out refinances, second homes, investment properties, 3 to 4 unit homes and manufactured homes each carry their own adjustments. A low appraisal can bump you into a pricier bracket, because your loan-to-value goes up.

Same house, same loan, and the 680 borrower pays about two and a half times what the 760 borrower pays. Credit is the biggest lever you control here.

And don’t take a payment at face value. Plenty of payment quotes leave mortgage insurance out, along with taxes and homeowners insurance; the mortgage payment calculator shows it as its own line. Until the insurer’s quote comes back, I estimate PMI on the high side, because I’d rather the real number come in under my estimate than over it.

Is PMI worth paying? Why PMI is not the enemy

Look at it the right way and PMI isn’t a penalty. It’s the price of keeping your cash.

That doesn’t make 5% down right for everyone. The full down payment math, including the extra interest on the bigger loan, is its own decision. One exception I hold firm on: on an investment property, put 20% down and skip mortgage insurance. Even with the benefits, it isn’t worth it there.

How to get rid of PMI on a conventional loan

Federal law, the Homeowners Protection Act, sets three exits from borrower-paid PMI on a home you live in, for loans that closed on or after July 29, 1999. Your loan’s owner can be more generous than these rules, never less.

1. You ask, at 80%. Once your balance reaches 80% of the home’s original value, on schedule or sooner through extra payments, you can request cancellation in writing. You need a good payment history (nothing 30 days late in the past 12 months, nothing 60 days late in the 12 months before that), a current loan, no second mortgage on the home, and proof the value hasn’t dropped below the original value. The servicer may require an appraisal.
2. It ends on its own at 78%. When the original schedule reaches 78% of original value, PMI ends automatically if you’re current. You don’t even have to call the bank. Extra payments don’t move this date, and today’s value doesn’t matter.
3. The midpoint backstop. If PMI is still on at the halfway point of the loan, it ends then, as long as you’re current. On a 30-year loan, that’s the month after payment 180.

“Original value” generally means the lower of the price you paid or the appraised value at closing. Here’s how those dates land on the example loan:

How to get rid of PMI early, without refinancing

You can beat that schedule two ways, and neither one needs a new loan.

Pay it down. Extra principal gets you to the 80% request line sooner, as the pad above shows. When you get there, send the written request. Don’t wait for the bank to notice.

Use your home’s new value. If your home has gone up in value, or you’ve added value with a remodel, you may be able to drop PMI based on today’s value instead of the original. On Fannie Mae loans, the general rule is a balance at 75% or less of today’s value once the loan is two to five years old, or 80% or less after five years, with a clean payment record: nothing 30 days late in the past year and nothing 60 days late in the past two. If improvements are what raised the value, the two-year wait can be waived and the line is 80%. Freddie Mac loans follow similar rules, and rentals and 2 to 4 unit homes have stricter limits. Not sure who owns your loan? Your servicer can tell you.

You can’t order your own appraisal for this. Call your servicer, ask them to reassess the house, and they’ll order the valuation; you pay for it. Ask first exactly what they need and what it costs.

Be realistic about the bar. On the example loan, two years in you’d owe about $325,000, so 75% takes a value near $433,000, a gain of about 24%. Just past five years you’d owe about $311,000, and 80% works at a value near $389,000, a gain of about 11%.

One note as of November 2026: an October 2026 executive order asked for a pilot that would cancel mortgage insurance automatically using computer valuations. Nothing has changed for borrowers yet, so the rules above are the ones that apply.

Getting rid of PMI by refinancing

A refinance measures your home again. If the new loan is 80% or less of the new appraised value, a conventional loan needs no mortgage insurance at all. Owe $315,000 on a home that now appraises at $400,000, and the new loan is under 79% of value: no PMI. If you’re a little short, cash closes the gap. A $500,000 value supports a $400,000 loan at 80%, so on a $435,000 balance you’d pay about $35,000 down at closing.

A high appraisal alone doesn’t do it. What counts is where the new loan amount lands against that value, so rolling closing costs into the loan can push you back over the line.

Keep it in proportion. A refinance is mostly about the rate, and dropping PMI is icing on the cake. The two stack: $200 a month from a lower rate plus $100 of PMI is $300 a month. But if rates have risen since you bought, dropping PMI with a refinance can leave the payment about where it started. And if a refinance is coming soon, don’t throw extra money at principal first; keep the cash and use only what the refinance needs. Run the refinance break-even before you decide.

FHA MIP removal: 11 years or the life of the loan

If you searched how to get rid of PMI on an FHA loan, the charge you’re looking at is MIP, and the PMI rules above don’t apply to it. FHA charges mortgage insurance on every loan, in two pieces. The up-front premium is 1.75% of the base loan amount, usually added to the loan. The annual premium depends on your down payment:

Those are the rates for loans longer than 15 years with a base loan up to $726,200. In the Richmond area the 2026 FHA limit for a one-unit home is $707,250, so every one-unit FHA loan here falls in that table. Loans of 15 years or less pay less: 0.15% a year for 11 years with 10% or more down, or 0.40% a year for the life of the loan with less.

On a $350,000 home with 3.5% down, the base loan is $337,750. The up-front premium is about $5,911, usually financed, and the annual premium of 0.55% is about $155 a month in year one, recalculated as the balance falls. FHA’s premium doesn’t change with your credit score: a 620 and an 800 pay the same rate at the same down payment.

There’s no request that takes MIP off early. You refinance out of FHA or you sell. Once you have the equity and the credit, a conventional refinance at 80% of value or less carries no mortgage insurance at all. Above 80%, compare the conventional rate plus PMI against your FHA rate plus MIP, because in my experience the conventional rate is often higher. You have to treat interest rate plus mortgage insurance as one number. An FHA streamline keeps you in FHA, so the MIP stays. HUD’s benefit test on a streamline counts the rate and the MIP together, and an FHA-to-FHA refinance within three years credits back part of your up-front premium. More on the FHA streamline.

Single-premium and lender-paid mortgage insurance

When you see a conventional loan under 20% down with no PMI line, the insurance is still there. It’s being paid one of two other ways.

Single premium. You pay the insurance once at closing instead of monthly. On the same rate cards (typical pricing, not a quote), 5% down with a 740 score, the single premium is 1.73% of the loan: about $5,752 on $332,500, in place of about $147 a month. Run Gap, Savings, Break-Even: $5,752 ÷ $147 is about 39 months. At 5% down, the single premium runs about 36 to 39 months of the monthly premium across every score band on those cards. That fails my 24-month test, and the single-premium rates above are for non-refundable policies: if you refinance or sell, you don’t get back what you prepaid for insurance. When a buyer has that much spare cash, I’d usually rather see it go into the down payment, where it shrinks the PMI or ends it.

Lender-paid. The lender buys the policy and you pay for it with a higher interest rate, for as long as you keep the loan. Because it’s built into the rate, it doesn’t come off at 80% or 78%. Federal law’s three exits don’t apply to lender-paid insurance: you can’t cancel it, and it ends only when the loan does, through a refinance, a sale or a payoff. It can make sense if you’ll sell or refinance within a few years; the longer you keep the loan, the more it costs. Weigh it the way you’d weigh any rate trade, with Gap, Savings, Break-Even.

Mortgage insurance is a cost with an exit. On a conventional loan, know your three dates and keep an eye on your value. On FHA, know which clock you’re on, 11 years or the life of the loan, and plan the refinance that ends it.