Private mortgage insurance is one of those costs that shows up on your monthly statement long after most homeowners stop thinking about it. If you put down less than 20% on a conventional loan, PMI was almost certainly added to your payment. Here is how to get rid of it, and when refinancing is the only option.
When PMI Applies
On conventional loans, lenders require PMI when the loan-to-value ratio at closing exceeds 80%. That means if you purchased with 5%, 10%, or even 15% down, you are currently paying PMI.
The cost varies by lender, loan size, and credit profile, but PMI typically runs between 0.5% and 1.5% of the original loan amount per year, added to your monthly payment. On a $350,000 loan, that is roughly $145 to $438 per month. It adds up quickly, and it provides zero benefit to you. It protects the lender in case of default.
Path 1: Automatic Cancellation at 78% LTV
Under the Homeowners Protection Act, your lender is required to automatically cancel PMI once your loan balance reaches 78% of the original purchase price, based on the original amortization schedule, not the current market value of your home.
You do not need to request this. The cancellation must happen automatically when the amortization schedule reaches that milestone.
There is a catch: this is based on the original property value, not appreciation. If your home has risen in value significantly, you may hit 80% LTV based on current value long before the amortization schedule reaches 78%.
Path 2: Request Removal at 80% LTV Based on Current Value
This is where Pennsylvania homeowners have an advantage in a rising market. If your home has appreciated and your current loan balance is at or below 80% of the current appraised value, you can proactively request PMI cancellation.
The process typically requires:
- A written request to your lender or servicer
- A current appraisal (ordered by the lender; you typically pay $400, $600)
- Confirmation that your loan is current with no recent late payments
- Lender verification that your property value supports the removal
If the appraisal comes in supporting 80% LTV or better, your lender must remove PMI. This path can eliminate PMI years ahead of the automatic cancellation date, saving thousands.
FHA MIP: A Different Problem That Requires a Different Solution
FHA mortgage insurance, called MIP (Mortgage Insurance Premium), operates under completely different rules, and many borrowers are surprised to learn they cannot simply "request removal."
For FHA loans originated after June 3, 2013, with a down payment below 10%:
MIP is permanent for the life of the loan.
There is no appraisal path, no cancellation request, no threshold that triggers removal. MIP stays until the loan is paid off or refinanced. For FHA loans with 10% or more down, MIP falls off after 11 years, but that is a long time to pay insurance.
PMI vs. MIP: What You Are Actually Paying
| PMI (Conventional) | MIP (FHA) | |
|---|---|---|
| When required | LTV > 80% | Down payment < 20% (all loans after 6/3/13) |
| Upfront cost | None (typically) | 1.75% of loan amount at closing |
| Annual cost | 0.5%, 1.5% | 0.55%, 1.05% of loan balance |
| Removal path | At 78% LTV (auto) or 80% LTV (request) | Permanent (if < 10% down); 11 years (if 10%+ down) |
Should You Refinance to Eliminate FHA MIP?
For FHA borrowers with sub-10% down who took out loans after June 2013, refinancing to a conventional loan is the only exit from permanent MIP. Whether it makes sense depends on a break-even analysis:
Monthly savings = Current FHA payment (with MIP) − Projected conventional payment (without PMI if LTV ≤ 80%)
Break-even period = Refinance closing costs ÷ Monthly savings
If you plan to stay in the home longer than the break-even period, the refinance pays for itself. In Pennsylvania, closing costs on a refinance typically run 2 to 4% of the loan amount. On a $300,000 refinance, that is $6,000, $12,000. At $200/month in savings, you break even in 30 to 60 months.
Two additional considerations: if your current rate is below today’s market rates, refinancing to remove MIP costs you the rate differential permanently. And if your LTV is still above 80% on current value, a conventional refinance will simply replace MIP with PMI, a lateral move, not an improvement.
Frequently Asked Questions
How do I request PMI removal at 80% LTV on my Pennsylvania mortgage?
Submit a written request to your loan servicer. You will typically need to order a new appraisal (at your expense), confirm your loan is current, and provide documentation that supports your LTV claim. If the appraisal supports 80% or better, your servicer must remove PMI under the Homeowners Protection Act.
Can I get rid of FHA mortgage insurance without refinancing?
Only if your FHA loan was originated before June 3, 2013, or you put down 10% or more. For FHA loans originated after June 3, 2013, with less than 10% down, MIP is permanent and cannot be removed without refinancing to a conventional loan.
Is it worth refinancing out of FHA just to remove MIP?
It depends on your current rate, remaining loan term, and home value. Run a break-even analysis: divide total refinance closing costs by monthly savings. If you plan to stay in the home beyond that break-even point, refinancing to conventional may make financial sense, especially if your home has appreciated and your LTV is now at or below 80%.
Ready to analyze whether a refinance makes sense for your Pennsylvania mortgage? Call Lena Polnet at (215) 364-7171 to review your options.
Lena Polnet, NMLS #17225 | Dynamic Funding Solutions, NMLS #17144 | dynamicfunding.net | (215) 364-7171. This content is for informational purposes only and does not constitute a commitment to lend. Loan approval is subject to credit, income, and property qualification. Not all borrowers will qualify.