Will Refinancing Lower My PMI?

Refinancing ends private mortgage insurance (PMI) when the new loan is 80% or less of your home's current appraised value, because Fannie Mae requires mortgage insurance on conventional loans only above 80% of value. On a conventional loan, though, you can often drop PMI without refinancing: you can ask your servicer to cancel it once your balance reaches 80% of the home's original value, and it ends automatically at 78%. FHA loans are different. If your FHA annual premium lasts for the life of the loan, refinancing into a conventional loan is usually the only way to stop paying it.

For PMI cancellation, "original value" generally means the lower of the purchase price or the appraised value when you bought the home. If your current mortgage is a refinance, use the appraised value from that refinance.

When does a refinance remove mortgage insurance?

A new conventional loan needs mortgage insurance only when its loan-to-value ratio (LTV), the loan amount divided by the home's value, is above 80%. For a refinance, the value comes from a new appraisal or another valuation the lender accepts, so a rise in your home's value counts.

Example. You owe $320,000 on a home you bought for $380,000, so your LTV on the original value is 84%. The home now appraises at $430,000. A new $320,000 loan would be 74.4% of current value ($320,000 / $430,000), so it would carry no PMI.

Two things can work against you. Freddie Mac caps cash-out refinances on a one-unit main home at 80% LTV, so borrowing above that limit prevents qualification. And a conventional rate-and-term refinance can go as high as 95% LTV on a one-unit main home, so getting approved does not mean the new loan is PMI-free. Ask the lender to show the LTV and any mortgage insurance on the Loan Estimate before you commit. The requirements to refinance a mortgage covers credit and equity rules.

Can you cancel PMI without refinancing?

Usually, yes, on a conventional loan for a main home that closed on or after July 29, 1999. The Homeowners Protection Act gives you three routes:

Once PMI is canceled or terminated, the servicer must refund any unearned premiums within 45 days.

If your home has gained value, Fannie Mae also lets borrowers on loans it owns cancel PMI based on a new valuation. For a one-unit main home, the LTV on current value must be 75% or less if the loan is 2 to 5 years old, or 80% or less if it is more than 5 years old. You must be current, with no payment 30 or more days late in the past 12 months and none 60 or more days late in the past 24 months. The servicer orders the valuation through Fannie Mae's system. In the example above, a 74.4% LTV on a loan between 2 and 5 years old would meet this test, and you would need only the valuation instead of a full set of closing costs. Ask your servicer who owns your loan and what its current-value rules are.

Why do FHA borrowers usually have to refinance?

FHA loans carry a mortgage insurance premium (MIP) instead of PMI, and the Homeowners Protection Act cancellation rules do not apply to them. For FHA loans with case numbers assigned on or after June 3, 2013, HUD sets how long the annual premium lasts:

If you are in the first row, paying down your balance does not end MIP. An FHA streamlined refinance does not help either: it keeps you in FHA, charges a new 1.75% upfront premium, and starts a new annual premium on the new loan. Refinancing into a conventional loan at 80% LTV or less ends the premium. FHA loans with case numbers assigned before June 3, 2013 follow older cancellation rules, so ask your servicer whether your premium will end on its own.

Refinancing FHA, VA, jumbo, and USDA loans compares the FHA streamlined refinance with a move to a conventional loan.

Does refinancing to drop PMI pay for itself?

Compare the closing costs with what you save each month, counting both the mortgage insurance and any change in your principal and interest payment. What refinancing costs lists the fees to expect.

Conventional loan. In the example above, suppose PMI costs $150 a month and the new loan has the same rate, balance, and remaining term, leaving principal and interest payments unchanged. With $6,000 in closing costs paid upfront, you recover those costs in 40 months ($6,000 / $150) only if you keep the new loan and would otherwise pay $150 in PMI every month for that period. If PMI would end sooner, count PMI savings only through that date. The current-value cancellation route would cost only the valuation, so check it first.

FHA loan. You owe $300,000 at 6.0% with 27.5 years left. Principal and interest is $1,858.37, and an annual MIP of 0.55% adds about $137.50 a month ($300,000 x 0.0055 / 12), for $1,995.87. The new loan's rate changes the monthly payment:

The 47-month estimate ($7,000 / $148.72) assumes costs are paid upfront and MIP would otherwise stay at $137.50 a month. It measures payment savings only: extending repayment from 27.5 to 30 years slows principal repayment and adds interest. Compare total payments, closing costs, and remaining balances for both loans at the date you expect to sell or refinance.

At 7.0%, the higher rate eats the entire MIP saving. Freddie Mac's survey put the average 30-year fixed rate at 7.32% for the week of October 22, 2026, so an FHA borrower whose current rate is well below that average may come out ahead by keeping the FHA loan and rerunning this math when conventional rates are closer to the current rate. How to calculate mortgage insurance shows how premiums are priced.

What it means to refinance a mortgage explains how the new loan pays off the old one at closing.