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Because we aren’t all Warren Buffett sitting on a mountain of money, many of us don’t have a 20% down payment when it comes time to buy a house. The good news is you can still put down less than 20% – you just have to pay mortgage insurance.

Mortgage insurance gives you a lot more buying power because you don’t have to bring as much money to the table in the form of a down payment. The downside is that it’s an additional item tacked on your mortgage payment every month.

The goal of this post is to give you some clarity around if and when you can get rid of your mortgage insurance. In some cases, it vanishes into thin air of its own accord.

First, we’ll go over some factors affecting whether you can get rid of your mortgage insurance and when you can do it. After that, we’ll look at how these factors together help you determine whether or not you can eliminate your mortgage insurance.

Factors Affecting Your Mortgage Insurance Removal

There are six factors that affect whether your mortgage insurance can be removed: the type of mortgage insurance involved, who holds your loan, the loan-to-value (LTV) ratio, the property type, the age of the loan and whether or not your property value has increased.

Types of Mortgage Insurance

Before we go any further, there are two types of mortgage insurance to define: private mortgage insurance and mortgage insurance premiums.

If you pay mortgage insurance on a monthly basis on conventional loans, that’s called private mortgage insurance (PMI).

You pay mortgage insurance premiums (MIP) on FHA loans. You pay a portion of the premium upfront at the close of the loan and then continue to make payments on a monthly basis.

 

Who Holds Your Loan?

The next thing you need to know is who your loan investor is. Fannie Mae and Freddie Mac have different policies regarding when mortgage insurance can be eliminated. Depending on the age of your loan and the amount of your down payment, MIP may or may not be removable from FHA loans.

If you don’t know whether your conventional loan is held by Fannie Mae or Freddie Mac, you can use their lookup tools. Here’s one for Fannie and one for Freddie.

Loan-to-Value (LTV) Ratio

Maybe the most important aspect of whether your mortgage insurance can be canceled is your loan-to-value (LTV) ratio. In simplest terms, your LTV measures the amount of equity you’ve built up in your home. The number signified by the ratio is the percentage of your home value you still have to pay off.

Your LTV is based on the original value of your home. Original value is either the appraised value or the purchase price, whichever is lower. Let’s look at a quick example.

If you purchase a home for $100,000 that’s appraised at $120,000, LTV would be calculated based on the purchase price. Therefore, if you made a $10,000 down payment, you would be at 90% LTV. Your LTV continues to go down as you make payments. It also goes down as your property value goes up.

Property Type

The requirements for removing PMI also change depending on the type of property you have. We’ll get into specifics later on. For right now, the important thing to know is that removing mortgage insurance on a one-unit primary residence or vacation home is easier than taking it off multi-unit primary properties or investment homes.

Age of the Loan

In some instances, the age of the loan is a determining factor in whether mortgage insurance can be removed. This especially comes to the forefront when trying to remove FHA MIP. It also sometimes makes a difference when you’re trying to remove PMI due to a gain in equity caused by an increase in your property value.

Property Improvements

If you’ve made substantial property improvements that cause increases to the value of your home, you’ll need to get a new appraisal to substantiate the improvements. Depending on the age of your loan, it may also change the amount of equity needed to remove the mortgage insurance.

Now that we know the factors that affect whether or not your mortgage insurance is eligible to be canceled, let’s see how these things interact with some real-world examples.

Canceling MIP

MIP cancellation is the easiest scenario to take a look at. Unfortunately, the reason for this is that it can’t be canceled in many cases.

If your loan closed on or after June 3, 2013 and you had a down payment of less than 10%, MIP will never be removed. With down payments of 10% or more, you still have to pay MIP for 11 years.

If your loan closed before that date, the outlook is a little better. On a 15-year term, MIP is canceled when your LTV reaches 78%. For longer terms, the LTV requirement remains the same, and you have to pay MIP for at least five years.

Conventional PMI

Conventional loans are the most flexible type of loan, allowing borrowers to purchase the greatest range of properties. However, this variety means there are a lot of variables that come into play in determining when or if mortgage insurance can be canceled.

One-Unit Primary Residence or Vacation Home

If the residence is your single-family primary home or second home, your mortgage insurance will be canceled automatically in either of the following scenarios, whichever happens first:

  • The LTV reaches 78% (and you didn’t make extra payments to get it there)
  • You reach the midpoint of your mortgage term (15 years on a 30-year mortgage, for example)

To give these numbers some context, if you had a 10% down payment at an interest rate of 4.0%, you’ll reach 78% LTV after 81 months. The same scenario with a 5% down payment would take 104 months. The auto cancellation occurs as long as you’re current on your payments.

If you don’t want to wait for it to auto cancel, you have some options. If your LTV reaches 80% through payments, you can request cancellation. In most cases, you will have to get a new appraisal in order to verify that your home didn’t lose value.

Fannie Mae and Freddie Mac both allow you to make extra payments on the balance in order to get down to 80% faster.

If you’ve made home improvements to increase your equity by increasing your property value, Fannie Mae requires that you have 75% or less LTV before they will take off mortgage insurance. Freddie Mac leaves the requirement at 80%. All improvements have to be called out specifically in a new appraisal.

If you’re requesting removal of your PMI based on natural increases in your property value between two and five years after your loan closes, both Fannie Mae and Freddie Mac require a new appraisal, and the LTV has to be 75% or less. If your removal request comes more than five years after your closing, the LTV can be 80% or less with a new appraisal. These requirements apply to insurance removal based on market value increases not related to home improvements.

Multi-Unit Primary Residence or Investment Property

If you have a multi-unit primary residence or investment property, things are a bit different. With Fannie Mae, mortgage insurance cancels halfway through the loan term on its own. Freddie Mac does not auto-cancel mortgage insurance.

You can cancel PMI on your own when LTV reaches 70% based on the original value with Fannie Mae. Freddie Mac requires 65% for cancellation.

The requirements for Fannie and Freddie are the same if you want to have a new appraisal done to show a lower LTV. This is true whether the lowered LTV is based on a natural market-based increase in home value or home improvements. Please keep in mind that you must have had the loan for at least two years prior to requesting PMI removal on your investment property.

Note on Cancellation

There are a couple additional things to know about mortgage insurance cancellation. In order for mortgage insurance to auto-cancel, you have to be current on your payments. If you want to request a cancellation yourself, you can’t have had a 30-day late payment in the last year. You also can’t have had payments more than 60 days late in the past two years.

Help Sheet

In order to better help you figure out which situation applies to your loan, we’ve put together a sheet that should help you out.

To begin with, here are the requirements to remove PMI from conventional loans. Click the images below to enlarge.

 

There are some stipulations regarding how and when PMI can be removed.

Mortgage Insurance: When You Can Get Rid Of It - Quicken Loans Zing Blog

FHA loans have very specific requirements for when MIP can be removed.

Mortgage Insurance: When You Can Get Rid Of It - Quicken Loans Zing Blog

Hopefully this post has helped make more sense out of your mortgage insurance. Still have questions? Ask in the comments below!

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This Post Has 93 Comments

  1. We are planning to purchase a home for $250,000 and put 5 % down. When we sell our current home (estimating within a couple months after closing on our new home) we will get about $120,000 from that home sale. We are planning to recast the mortgage and dump most of the money from our home sale into the new home. Would that eliminate our PMI, even though it has only been a couple months since we purchased our new home? Or do we have to wait at least 2 years to get that PMI off? Thanks!

    1. Hi Candace:

      Since you’re requesting cancellation based on the original value of the property and not due to updated market values or remodeling, you should be able to remove PMI by recasting under this scenario you’ve outlined. Hope this helps! Be sure your lender allows recasting. Quicken Loans offers recasting starting after you make your first two payments on the new home, but not all lenders offer this. If you would like to look in your options for your new mortgage, you can do so online through Rocket Mortgage or by giving one of our Home Loan Experts a call at (888) 980-6716. I hope this helps and have good day!

  2. Purchased a home in October, 2015 for $337,900. Value estimated to be at $405,000. If I request to have removed what are the odds that it is removed?

    1. Hi Brandon:

      The exact guidelines depend on the type of loan you have, but it wouldn’t be removed right now. If you have an FHA loan, it’s never moved unless you refinance into a conventional loan through Fannie Mae or Freddie Mac. If you have a conventional loan, and you’re trying to get it removed based on the original valuation, you have to have 20% equity in the property. Right now you have about 16.6% equity based on the numbers you provided. There may be other ways of getting your mortgage insurance removed by reaching 20% equity based on a new appraisal, but it depends on who owns your loan. I’m going to suggest you reach out to one of our Home Loan Experts at (888) 980-6716 to go over all of your options.

      Thanks,
      Kevin Graham

  3. Ok… so we purchased our house in 2011 for $205,000.00 (FHA loan with 3% down) and we currently have $182,837.77 left on the loan after refinancing the house in December of 2015 for a lower rate of 4% ($1310 monthly payment with PMI). Recently my mortgage company did a escrow analysis and stated that we underpaid last year by $1665.00. What happened is somehow the mortgage company removed the PMI last year off our loan and now they put it back on the loan along with the $1665.00 deficit raising our monthly payment from $1188 to $1465. We have redone the downstairs bathroom, and installed Pergo floors on the upper floor. The value in our area has gone significantly up as well… ranging from $340,000 and up. My question is, can we remove the PMI? I mean we already had it removed, by the Mortgage company. Any help would truly be appreciated 🙂

    1. You may be able to. It depends on what type of loan you have. If you’re still in an FHA loan, they don’t allow reappraisal for the purposes of mortgage insurance removal. However, you can do this with a conventional loan. Your other option would be to just refinance into a conventional loan. If you would like to go over your options in that regard, you can get started online through Rocket Mortgage. Otherwise, if you prefer to talk to one of our Home Loan Experts, we would be happy to take your call at (888) 980-6716.

      Thanks,
      Kevin Graham

  4. My question is which number am I dealing with? I bought a house 2010 for $200,000 it appraised at $210,000 which I went FHA. Then in June of 2012 I refinanced a loan of $184,000 for a lower interest rate of 3.75% . Well now it’s 2017 five years later and since I have paying a little extra every month my loan is down to $152,600. I have made significant improvements to the house inside and outside guessing about $30,000 to $40,000 worth but at the same time the area went down a bit to where my house may appraise at $190,000 online but in person I am hoping it will be around 210-220,000. Hind sight is always 20/20 but I did miss the fact that my paper work states the LTV will come about not for another 15 months. Not sure why but I am confused on which to believe, am I due for my MIP to be cancelled or do I have to wait another 15 months. Please help because most are saying to refinance conventional with out the PMI but that will cost closing costs also they can’t match my 3.75%
    My MIP is $146.00 x 15 = $2190.00 which is less than closing costs but the best interest rate appears to be about 4.125% which is going in the wrong direction for sure.
    FYI: I was planing on to keep paying the $146.00 extra on my monthly to help pay it off sooner.
    Any help would be appreciated,
    Mike

    1. Hi Michael:

      The good news is based on the timeline you are giving, your mortgage insurance can come off. It comes off once you reach 22% equity in your home. Based on your most recent appraisal, you currently have about 17.1% equity. If you were to refinance into a conventional loan, the mortgage insurance could come off once you reached 20% equity, but as you said, interest rates are slightly higher, so you would have to figure out whether that works for you in terms of the math. If you want, one of our Home Loan Experts could go over your situation with you if you give us a call at (888) 980-6716 to help figure out what might be best. Thanks for reaching out!

      Kevin Graham

  5. i had a forclose started on my house but never was completed because i caught up the payments several years ago. (5) since then improved my credit high enought to get a refi on that house with an fha loan. the loan company says i must pay a pmi on my loan even though i wish to borrow 59,000 on my house that was appraised for 94,000. is this true and how long before i can get the pmi off? thank you, any advice please.

    1. Hi Timothy:

      If you go with an FHA loan, those policies are set by the federal government, so they’re standard across lenders for the most part. FHA guidelines require that you pay mortgage insurance for at least 11 years after the close of the loan regardless of how much equity you have in the home. With that being said, if you were to get a conventional loan through Fannie Mae or Freddie Mac, this wouldn’t be the case in your situation. We can certainly look into whether you qualify for a conventional loan at this point in time. If you would like to speak in more detail about your personal situation with one of our Home Loan Experts, you can do so by filling out this form or calling (888) 980-6716. Hope this helps!

      Thanks,
      Kevin Graham

  6. Question? We are purchasing a home for $282,000. We also need to sell our current home. If we can close both on the same day that would be great but at this point we haven’t put our house on the market (we will within the next week). We just signed contract on new house last night. IF we do not close on both the same day we will only have 3.5% to put down whereas we would have more than the amount required to not carry PMI (conventional loan) otherwise. I am being told different things by different lenders. I would like to be able to recast the loan as soon as we close on our current house if it sells after we close on the new house. This does not seem to be a problem with the lenders. The problem is with the PMI. I have one saying the PMI will be removed once recasted because of the amount being put into it with no time frame after closing on our current home. The other lenders are saying no way you have to wait at least one to two years to remove the PMI (but can recast to change payment but not remove PMI) depending on the Mortgage Insurance Company being used because otherwise they would not make any money on us. I am tired of conflicting statements. These lenders are very large in the industry and yet say they are playing in the same “sandbox” so the rules should be the same…..thoughts????

    1. Hi Danyelle:

      I can tell you that under normal circumstances without recasting the loan, you can request that PMI be removed once you reach 20% equity in your home. You can do that by making one large payment toward your principal when the sale closes on your current house. If you would like to recast your loan so that it’s re-amortized and lowers your monthly payment, that’s the part where I’m not sure how the interacts with the mortgage insurance requirements. I’m going to recommend you talk to one of our Home Loan Experts by filling out this form or calling (888) 980-6716. We can be sure to give you a definitive answer.

      Thanks,
      Kevin Graham

  7. hi,
    I purchased home on 05/2011 with FHA loan .the house is $150.000 I paid 3.5% down payment . now unpaid principal balance is $118,353.96 . so how I cancel or take off PMI OR MPI .please help, thank you

    1. Assuming you haven’t refinanced since the original loan was made in May 2011, mortgage insurance payments should come off once you reach 22% equity in your home. I just did the math and based on your unpaid balance in relation to the original purchase price, you have 21.1% equity at the moment. Another option if you are looking to get rid of mortgage insurance payments right now would be to refinance into a conventional loan. If that’s something you’re interested in, I’m going to recommend you talk to one of our Home Loan Experts by filling out this form or calling (888) 980-6716. Hope this helps!

      Thanks,
      Kevin Graham

  8. I just bought a home, appraised at $140k, bought for $78K, due to an agreement I previously had with the seller. Conventional loan, 3% down on the $78k. While the lender sites claim the purpose of PMI is to ensure the loan is payed back if defaulted, for people with less than 20% equity, I obviously have well above that from the start, but am apparently still required to have PMI for years. Given the original argument for PMI is bunk in my situation, and the lender refuses to remove the PMI, it certainly appears to be little more than a sneaky additional way for the lender to make more $ on the loan, under the guise of insurance. I was told the only way to remove it is to refi, which obviously costs more $ yet. Why was PMI required to begin with and what is your take on these practices?

    1. Hi Paul:

      I’m going to try to talk through your problem here. If you make no improvements at all, you can have your house reappraised after two years without refinancing to try and have the PMI removed. It’s also worth noting that the mortgage company doesn’t see any of that money. It goes to the mortgage insurer. Hope this clears up any confusion.

      Thanks,
      Kevin Graham

  9. We have an FHA loan that is just over 5 years old. Never been late on a payment and have always paid more than what was due. We have added a pool… does the FHA take into consideration substantial improvements? With the addition of the pool our appraised value would definitely be over the threshold… We have been told several different things… just trying to get another opinion. Any help would be appreciated.

    1. Hi Jeff:

      Unfortunately, when the FHA looks at your loan-to-value (LTV) ratio for the purposes of mortgage insurance cancellation, they do it based on the original value of the property. Getting a new appraisal would not help. However, you could refinance into a conventional loan. If you want to take a look at doing that, you can get a full refinance approval through Rocket Mortgage. One of our Home Loan Experts would also be happy to help you if you call (888) 980-6716.

      Thanks,
      Kevin Graham

  10. Hi Kevin,

    Really, really nice of you to first post this article, then second hang around to answer questions that arise.

    My home was purchased in April of 2010. I did 2 refi’s after that each dropping the interest rate a percentage point. From 5.25 to 4.25 and now at 3.25. The last refi was finalized 1/1/2013. I’ve been paying a little extra every month, and the comps in my neighborhood show I have definitely reached the 80/20 threshold, if not a little more.

    My question is on the rule that you have been paying MIP for 5 years. Does that apply to the current loan, so I can’t request removal of MIP till next Jan? Or since I’ve been paying MIP since 2010, on 3 different loans, I’ve met that threshold already?

    Thanks again!!!

    1. Good morning, Perry:

      Each time you refinance on an FHA loan, the clock resets. So you would be eligible to remove MIP, assuming you had reached 78% LTV, in January 2018. You can look at refinancing into a conventional loan to stop paying mortgage insurance right now, but with your rate being where it’s at, I’m not sure that makes a lot of sense for you. It would probably be best to wait it out.

      Thanks,
      Kevin Graham

  11. I am trying to get a waiver for home improvements I put in a pool and did lots of landscaping in my back yard, I was told home improvements did not include these types of items do you have a reference section for Fannie Mae where I could see that with my own eyes

    1. Hi Steve:

      Depending on the landscaping work, that could be considered cosmetic and temporary in nature. It may help sell your house, but it won’t necessarily add to the value. However, I would think a pool would constitute a substantial improvement that can be backed up by a new appraisal – assuming the pool was permanent. I’m going to recommend you talk to one of our Home Loan Experts by calling (888) 980-6716. They would be able to give the most definitive information.

  12. Thank you for the detailed information, it was extremely helpful. Although this may have been answered in the article I am still uncertain about a couple things and hope that you are able to help. I am planning on purchasing a home, when I close on that house I will not have the funds required to avoid PMI. Once the sell of my current home is finalized I plan to recast and then the LTV will certainly be at 78%. I am expecting to recast about a month after the closing date. Will I be able to cancel the PMI right after the recasting (certainly at 78% LTV)? I will only be about a month or two into the new home, can I still cancel or are there hidden expectations for me to have the PMI one to two years even after over 35% is put down on the home?
    Thank you for your help!
    Sarah

    1. Hi Sarah:

      That’s a very good question that I don’t necessarily have the answer for. You can recast, but I’m not sure how it affects your mortgage insurance. I’m going to recommend you talk to one of our Home Loan Experts by calling (888) 980-6716.

      Thanks,
      Kevin Graham

  13. Hello Kevin,

    I bought my house in 2010 for $148,000 and I currently owe less than $125,000 on the property. The area has exploded due to companies moving in the area and the sales values rising at an incredible rate. My tax appraised value is at $197,902.00 and the tax assessed value is at $178,217.00. Based on my current appraised and assessed values my LTV is 63.2% and 70%. Can I request an appraisal and have PMI removed based on the values today? A house with the same floor plan sold less than a block away for $25,000. Also, is the appraisal a full appraisal or a drive by with comps?

    Thank you in advance!

    Dan

    1. Hi Dan:

      It’s hard to say because the questions you as being vary depending on who owns your loan. Also, some investors do drive by appraisal and some don’t. I’m going to send you an email. If you know which investor owns your loan, I may be able to give you more guidance.

      Thanks,
      Kevin Graham

  14. Hello Kevin, I am wondering if you will be able to help me. My situation is in June 2011 I foreclosed on a house like many others caught in the housing market. I have been able to get back on my feet and was able to purchase a house for 800,000 dollars in March 2016 and I was forced to put down 240,000 dollars. The loan officer told me that since the foreclosure was still showing in my record that the only way they would fund the loan is with PMI. My question is what do you suggest I do to get rid of the PMI? Would I be able to refinance or request the lender to cancel the PMI?

    Thank you,

    Vladimir

    1. Hi Vladimir:

      I’m going to suggest you talk to one of our Home Loan Experts to get some advice. Based on the property value, you’re getting into some higher loan amounts and I want to make sure you get the right answer. You can talk to them by filling out this form or calling (888) 728-4702.

      Thanks,
      Kevin Graham

  15. Hi Kevin,
    Your information regarding additional payments and early cancellation of PMI for Freddie Mac backed loans is incorrect. Freddie Mac and Fannie Mae are both bound by the same borrower-requested PMI cancellation rules because these rules are mandated by federal law in the Homeowner’s Protection Act of 1998. Even Freddie Mac’s website (http://www.freddiemac.com/blog/homeownership/20150420_1_fyi_on_pmi.html) indicates that PMI cancellation can be requested in writing if the LTV reaches 80% via extra principal payments.

  16. I have a conventional 30 year loan and had 10% equity when I refinanced 2 years ago. I have paid it down to 80% now and never been late on a payment. It is a Freddie Mac and my PMI is $130. I know the house value has gone up although I don’t know how much. I just purchased a ground mounted solar system for $39,000. This is considered an improvement to the property, no? The solar loan does not use my house as equity. I’d like to cancel the PMI and made a request to the new company that just bought out my loan last month. I haven’t heard from them yet. How soon do they have to answer my request and do you think I qualify for dropping the PMI?

    1. Hi Susan:

      In general, you’re allowed to pay down a Freddie Mac loan to get to 80% and stop paying the PMI. Certain states have different policies regarding mortgage insurance and I’m not sure what state you’re in. However, you should qualify in general. As far as how long they have to get back to you, I might try calling and bugging them. It’s really a yes or no question.

      Thanks,
      Kevin Graham

  17. hi,

    thanks for a great article. it has lots of helpful info on PMI. It makes me think though, are there any situations, like my situation, when there is just no way to have PMI removed at all, even thru till the end of the term?

    In 2007 I got a first time home buyers loan for condo in NJ. I did not put down 20%, I put down about 7.5%. I also probably got a few points off a interest rate as part of this first time home buyers loan, the rate I got was 5.875. In 2016 I am now at 78% LTV, I’ve never been late, and am always current.

    I’ve been thru a few servicers, currently CENLAR. My loan is owned by NJ Housing and Mortgage Finance Agency.
    Who makes the call on removing the PMI, CENLAR or NJ Housing?

    I lived in the condo for a few years, but then the economy downturn, and I lost my job. I rented the condo. I currently still do rent it. I have a family and would never be able to go back to living condo (because you know… families do happen in life)

    CENLAR refuses to removal PMI because I am not living in the condo. I’ve explained my previous hardship and my life change and they still refuse. I looked at the mortgage docs and there is nothing that states a specific relation between primary residence and PMI….

    This is the last email from CENLAR’s PMI team:
    We understand your situation, however there are no exceptions to your mortgage agreement, which states that the homeowner must occupy the property at all times. Our previous statement remains: in order to restore PMI removal eligibility, you will need to move back into the property or sell it.

    (while their response is defeating it is more specially annoying because telling me to sell the property to remove the PMI is inane. Selling the property wouldn’t actually remove PMI from the loan, because the loan would be closed, canceled, never to change again! But that really isn’t pertinent here, I know : ) )

    any advice please?

    thanks!

    -J

    1. Hi J:

      I sympathize. I can really only answer part of your question for reasons I’ll get into a bit below.

      I’m going to take this kind of backwards. The lender makes the decision on PMI removal, but the servicer would know the requirements of the lender. There are also some complications here.

      Because we only deal with federally backed loans as opposed to the state backed loans like the one you’re dealing with, it’s difficult for us to give you solid advice.
      I can tell you that when you move out of the primary property and start renting it, it becomes an investment property. Normally, on investment properties there may not even be PMI, but that’s because there’s a higher down payment involved. Unfortunately, we’re not able to tell you what would happen on the conversion from primary to investment for this particular loan holder. The best people to talk to about that would be your lender.

      Thanks,
      Kevin Graham

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