How to Remove Mortgage Insurance (MI): A Detailed Guide for Homeowners

Mortgage insurance can be a frustrating expense, but with the right strategy, you can remove it earlier than you might think. Whether you're dealing with private mortgage insurance (PMI) for conventional loans or mortgage insurance premiums (MIP) on FHA loans, here’s an in-depth look at how to eliminate it—step by step.

Removing PMI on Conventional Loans

1. Automatic PMI Removal

Most conventional loans are set up for automatic PMI removal when the loan-to-value ratio (LTV) reaches 78% of the original property value (purchase price or appraised value, whichever is lower) based on the loan’s amortization schedule. To qualify:

• Your payments must be on time.
• No action is required from you—this happens automatically.

2. Borrower-Initiated Removal at 80% LTV

You don’t have to wait for automatic removal. PMI can be canceled earlier if you reach 80% LTV through regular payments or extra principal payments. To request removal:

• Submit a written request to your loan servicer (check if this must be wet-signed or submitted via their online portal).
• Include your loan number in the request.
• The servicer may require proof of good payment history and an appraisal or Automated Valuation Model (AVM) to confirm your property’s value.

3. Based on Current Market Value

If your property has appreciated significantly, you can request PMI removal based on your home’s current value. The process differs slightly depending on whether your loan is backed by Fannie Mae or Freddie Mac:

• Fannie Mae Requirements:
• The loan must have at least two years of seasoning (measured from the first payment date).
• If the loan is less than two years old, PMI can only be canceled if substantial structural improvements were made (e.g., a kitchen remodel, finishing a basement, or adding square footage).
• If the loan is:
• Less than 2 years old: Substantial structural improvements must justify a new appraisal showing at least 80% LTV.
• 2–5 years old: Appraised LTV must be 75% or less.
• More than 5 years old: Appraised LTV must be 80% or less.
• Freddie Mac Requirements:
• Similar rules apply, but each servicer may have specific guidelines.

Tip: Some lenders may use an AVM instead of a full appraisal, which can save time and money.

Removing MIP on FHA Loans

FHA loans follow different rules depending on when the loan was originated, the size of your down payment, and how much equity you’ve built.

1. Automatic Removal for Older FHA Loans

• For FHA loans originated before June 3, 2013, MIP is automatically removed once your LTV reaches 78% and you’ve paid MIP for at least five years.

2. After 10 Years With a 10% Down Payment

• For FHA loans originated after June 3, 2013, if you put 10% or more down at the time of purchase, MIP is automatically removed after 11 years (the 10-year mark plus an extra year to meet MIP requirements).

3. Refinancing to a Conventional Loan

• If your FHA loan was originated after June 3, 2013, and your down payment was less than 10%, MIP is required for the life of the loan.
• The most common way to remove MIP on these loans is by refinancing into a conventional loan once you reach 20% equity.

Accelerate MI Removal With Extra Payments

Whether you have PMI or MIP, paying extra toward your loan’s principal can help you reach the equity thresholds needed for removal faster. Contact your servicer to ensure additional payments are applied correctly.

Take Action Today

Removing mortgage insurance is a great way to save money and improve your financial health. Whether you’re considering extra payments, refinancing, or requesting an appraisal, the key is understanding your options and taking proactive steps.

If you’re ready to explore your options, contact me today for a personalized review of your loan and home equity. Together, we can map out the best path to eliminating your MI and maximizing your savings.