By the RefiPoint Editorial Team · Updated June 2026 · Researched from authoritative sources. General information, not professional advice.
Private mortgage insurance can quietly cost a typical borrower hundreds of dollars a month — for a policy that protects the lender, not you. The good news: on most conventional loans you do not need to refinance to make it go away. Federal law gives you the right to cancel it, and your servicer must drop it automatically once you reach a set equity threshold. A refinance is one tool to remove mortgage insurance, but it is often not the cheapest one. This guide explains every route, when each makes sense, and the important exception for FHA loans.
Private mortgage insurance (PMI) is charged on most conventional loans when you put down less than 20%. Because a smaller down payment leaves the lender more exposed if you default, the lender requires an insurance policy — paid by you — that reimburses the lender for part of its loss. The cost typically runs a fraction of a percent of the loan balance per year and is folded into your monthly payment. It is genuinely your money buying protection for someone else, which is exactly why it is worth removing as soon as you are eligible.
The figure that controls everything here is your loan-to-value ratio (LTV) — your remaining balance divided by the home's value. PMI exists because your LTV started above 80%. Drive it back down to (or below) 80%, and the legal levers to remove PMI open up.
The single most useful thing to know is that the Homeowners Protection Act of 1998 (HPA) — sometimes called the PMI Cancellation Act — gives borrowers with conventional loans concrete rights. The Consumer Financial Protection Bureau (CFPB), which enforces consumer mortgage rules, summarizes three milestones under the HPA:
A crucial detail the CFPB stresses: the 78% and automatic milestones are measured against the home's original value (the lower of the purchase price or the original appraisal), not today's market value. That distinction is why a fast-appreciating home often means requesting cancellation rather than waiting for the automatic drop.
To exercise the 80% request right, you generally need to: submit the request in writing; have a good payment history with no recent late payments; be current on your loan; and certify there are no other liens (such as a second mortgage). Your servicer may also require evidence that the property value has not declined — in practice, a new appraisal or broker price opinion that you pay for. If rising prices have pushed your equity past 20% faster than scheduled, a current appraisal is often what unlocks early cancellation, because it lets you prove a lower LTV against today's value rather than waiting on the amortization schedule.
| LTV (of original value) | What happens | Who initiates |
|---|---|---|
| 80% | You gain the right to request cancellation | You (in writing) |
| 78% | Servicer must automatically terminate PMI | Servicer |
| Loan midpoint | Final mandatory termination if not already removed | Servicer |
| Below 80% on current value | Possible early cancellation based on appreciation | You (usually with a new appraisal) |
If your home's value has risen sharply or you've paid the balance down well past 20% equity, a refinance can remove PMI by replacing your old loan with a new conventional loan whose LTV is at or below 80% — no insurance required on the new loan. This is most attractive when you'd also benefit from a lower rate or a shorter term, because then the PMI removal is a bonus rather than the whole justification.
The catch is cost. Refinancing carries closing costs (often a few thousand dollars), so removing PMI by refinancing only makes sense if the math works. Compare the cost of the refinance against simply requesting cancellation under the HPA, which may cost nothing more than an appraisal fee. As a rough rule, refinance to kill PMI when (a) you'll also lower your rate, or (b) your loan type won't let you cancel PMI any other way — which brings us to FHA.
FHA loans do not carry PMI; they carry a government mortgage insurance premium (MIP) set by HUD/FHA. The rules are different and far less forgiving. Under current HUD/FHA policy, for most FHA loans originated with the minimum down payment, the annual MIP lasts the entire life of the loan — the HPA's automatic-cancellation milestones do not apply. Paying your FHA balance down to 78% does not, by itself, end MIP the way it would end PMI on a conventional loan.
Because of that, the primary way to escape lifetime FHA MIP is to refinance out of the FHA loan into a conventional loan once you have roughly 20% equity. The new conventional loan has no MIP, and if your equity is at 80% LTV or better, no PMI either. If you can't yet refinance to conventional, an FHA Streamline Refinance can lower your rate while you build equity. We cover both paths in the FHA and VA streamline refinance guide.
Some loans use lender-paid mortgage insurance (LPMI), where the lender "pays" the PMI in exchange for charging you a higher interest rate. There's no separate PMI line item to cancel — and that's the trade-off. Because the cost is baked into your rate, LPMI generally cannot be cancelled at 80% LTV the way borrower-paid PMI can. The higher rate stays for the life of the loan unless you refinance. LPMI can lower your initial payment, but over a long hold it often costs more, and it removes the HPA cancellation lever entirely.
Equity grows two ways: you pay the balance down, and the home appreciates. Appreciation is the faster lever. If you bought a $300,000 home with 10% down ($30,000), you started at 90% LTV with a $270,000 balance. Wait for the automatic drop and you'd need the balance to fall to about $234,000 (78% of the original $300,000). But if the home appreciates to $360,000, your $270,000 balance is now just 75% of current value — below the 80% line — even though you've barely touched the principal. With a fresh appraisal proving the new value, you can request cancellation years early.
Suppose PMI costs you $150 a month ($1,800 a year). You have two ways out:
The lesson: on a conventional loan, exhaust your free HPA rights first. Reserve refinancing for when it also earns you a better rate or term, or when you're escaping FHA's lifetime MIP.
Usually yes, if you have a conventional loan. The Homeowners Protection Act lets you request cancellation at 80% LTV and requires automatic termination at 78%. Many borrowers never need to refinance — they simply request cancellation, sometimes after a new appraisal proves their home has gained value.
Generally no. Under HUD/FHA rules, most FHA loans carry MIP for the life of the loan regardless of how much equity you build. To drop it, borrowers typically refinance from FHA into a conventional loan once they have about 20% equity.
Servicers must terminate borrower-paid PMI automatically at 78% LTV and must end it at the loan midpoint, but they are not obligated to chase early cancellation for you. The CFPB advises borrowers to track their own balance and send the written request as soon as they reach 80%.
No. An appraisal supports a value-based cancellation request, but your servicer still applies its own requirements — a clean payment history, current status, no second liens, and its own value standards. Confirm what your servicer needs before you pay for an appraisal.
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