How to Get Rid of PMI on an FHA Loan: A Step-by-Step Guide

Figuring out how to get rid of PMI (private mortgage insurance) on an FHA loan can be confusing, so we’ve done the research to make it easier to understand. But first, please understand one important fact: FHA loans do NOT carry PMI. Instead FHA loans may have a Mortgage Insurance Premium (MIP). The two insurance types are not the same and are regulated very differently, with different rules and stipulations. Again: FHA loans can only carry MIP, not PMI — it’s a common misconception about mortgage insurance that is worth clarifying before we dive deeper…

Private mortgage insurance (PMI) is required on most FHA loans. It protects the lender in case you default, but it also adds an expensive monthly payment. Many borrowers want to know how to remove PMI from an FHA loan to save money.

In this comprehensive guide we’ll explain everything you need to know about canceling PMI on an FHA mortgage including

What is PMI on an FHA loan?
FHA PMI cancellation requirements
When can you remove PMI from an FHA loan?
Refinancing to remove PMI from an FHA mortgage
Alternatives to refinancing to remove FHA PMI
Tips for lowering your FHA PMI rate

Let’s start with the basics.

What Is Private Mortgage Insurance on an FHA Loan?

The FHA is a government agency that insures mortgages for buyers who may not qualify for conventional loans. Borrowers only need a 3.5% down payment to get an FHA loan.

But this low down payment comes with a tradeoff private mortgage insurance, or PMI

PMI protects the lender in case you stop making payments. It’s required on most FHA loans and costs 0.85% of the loan amount per year.

On a $250,000 mortgage, you’d pay about $177 extra per month in PMI. Over 30 years, that adds up to over $30,000!

Many FHA borrowers want to remove PMI to save money on their monthly payments. Next, let’s look at the cancellation requirements.

FHA PMI Cancellation Requirements

Whether you can cancel PMI on an FHA loan depends on when you got the loan:

FHA loans closed before June 3, 2013

You can remove PMI when your loan balance reaches 78% of the home’s original value. This usually happens from making regular payments over time.

FHA loans after June 3, 2013

If you put down less than 10%, you’re stuck with PMI for the life of the loan.
If you put down 10-20%, PMI cancels after 11 years.

Only FHA borrowers who put down more than 20% avoid lifetime PMI.

So when exactly can you remove PMI from an FHA mortgage?

When Can You Remove PMI From an FHA Loan?

Depending on your down payment and when you bought your home, here are the PMI cancellation scenarios:

1. Waiting for PMI to expire:

Pre-2013 FHA loans: PMI expires when you reach 78% loan-to-value (LTV) through regular payments.
Post-2013 loans with 10-20% down: PMI expires after 11 years if payments are current.

2. Refinancing: If your home value has increased, you may be able to refinance into a conventional loan and eliminate PMI.

3. Paying off your loan: PMI goes away if you pay off your mortgage.

For borrowers with post-2013 FHA loans and less than 10% down, PMI is permanent. Refinancing or paying off the loan are the only ways out.

Next, let’s discuss how refinancing can help you remove PMI.

Refinancing to Remove PMI From an FHA Mortgage

Refinancing your FHA loan into a conventional mortgage is the main path to removing PMI if you put less than 10% down.

Here are some key points about refinancing to remove PMI:

You’ll typically need 20% home equity to qualify for a conventional refinance.
Check your home value – if it has increased, you may reach 20% equity sooner.
Compare rates – your new rate shouldn’t exceed your current FHA rate.
Shop around – compare quotes from multiple lenders.
Watch closing costs – refinancing fees can be 3-6% of your loan amount.

While refinancing is the primary route to removing FHA PMI, it does come with costs. Next, let’s discuss some alternatives.

Alternatives to Refinancing for Removing FHA PMI

Besides waiting for your PMI to expire or refinancing your loan, here are a couple alternate options for removing PMI from an FHA mortgage:

Pay down your loan

Making extra payments towards your principal can help you reach 78% LTV faster. This only works for pre-2013 FHA loans.

Get a new home appraisal

If your home value has increased, a new appraisal showing 20% equity could allow you to cancel PMI on a conventional refinance without refinancing.

Raise your credit score

Improving your credit could help you qualify for better refinance rates, saving money when you refi to remove PMI.

Apply for a PMI removal program

Some lenders offer PMI removal programs for borrowers who have demonstrated on-time payments and increased home equity. Ask your servicer if any programs apply to your loan.

While complete PMI removal may not be possible depending on your situation, you may be able to reduce your PMI rate.

Tips for Lowering Your FHA PMI Rate

If you can’t remove PMI entirely, here are some ways to reduce the amount you pay:

Put at least 5% down – Reduces your annual PMI rate to 0.8%
Get a 15-year loan – Lowers your annual PMI rate to 0.70%
Pay down the balance – PMI is based on your loan amount, so extra payments reduce your PMI over time
Refi into a different term – Combine a refi with a shorter term to lower your PMI rate
Improve your credit – Better credit means better PMI rates

While you can’t control some factors, focus on the ones you can improve to reduce your monthly PMI payments.

Wrap Up: How to Remove PMI From an FHA Mortgage

Getting rid of PMI on an FHA loan can result in significant savings each month. But your options depend on your down payment, loan age, and equity position.

For post-2013 loans with less than 10% down, PMI is permanent. Refinancing or paying off the loan are your only options.

Pre-2013 FHA borrowers can request cancellation once they hit 78% LTV. Those with 10-20% down get PMI removed after 11 years.

Refinancing to a conventional loan with 20% equity is the primary path to eliminating PMI. Be sure to shop around for the best rates.

While removing PMI may not be possible for all FHA borrowers, steps like paying down the balance faster, improving your credit, or refinancing into a shorter term can help reduce your payments.

FHA Loans Originated After June 3, 2013

For FHA loans originated after June 3, 2013, it is much simpler to determine when the MIP can be removed. If you made at least a 10% down payment when you bought the home, MIP can be removed after 11 years. Otherwise, it will remain until the loan is paid off or refinanced.

What was your home’s initial down payment?

Your home’s initial down payment amount is the difference between the original purchase price and the original loan amount. This is another key piece of information you may need in order to determine whether you can remove MIP from your loan. We’ll dive into more details later, but if you had at least a 10% down payment and got your FHA loan after June 3, 2013, MIP can be removed after 11 years’ worth of payments.

If you don’t remember the initial down payment amount, you can find this out from the final documents you signed before you got the keys to the house. You can also try contacting the original lender, title/escrow company, or your real estate agent for assistance.

How to Eliminate Mortgage Insurance Premium from FHA Loans?

FAQ

Can I remove my PMI on my FHA loan?

When you refinance, you can avoid the PMI requirement by ensuring that your new loan is only 80% of your home’s value. If you decide to refinance for a larger amount, you’ll need to pay for PMI until your LTV ratio is 80%.

Can I remove PMI if my home value increases?

You can typically remove PMI if market conditions lead to a significant increase in your home’s value. You have to make a request with your lender and order a new appraisal.

Can you get rid of PMI without refinancing?

A borrower can request PMI be canceled when they’ve amassed 20 percent equity in the home and lived in it for several years. There are other ways to get rid of PMI ahead of schedule: refinancing, getting the home re-appraised (to see if it’s increased in value), and paying down your principal faster.

Do I have to wait 2 years to remove PMI?

Get an Appraisal Many lenders (like Fannie Mae) also require a two-year “seasoning requirement,” meaning you can’t have PMI removed until you’ve made two years’ worth of on-time payments—even if your equity has grown above 20%. If it’s been less than five years, you might even be required to have 25% worth of equity.

Does refinancing get rid of PMI on an FHA loan?

Typical conventional loans require mortgage insurance (PMI) unless you put 20 percent down. However, with FHA loans, you cannot get rid of MIP (Mortgage Insurance Premium) through refinancing. How is MIP calculated by FHA?

Do FHA loans require PMI?

All FHA loans require mortgage insurance premium (MIP)*, regardless of down payment size. So, you will have to pay FHA mortgage insurance even if you put down 20 percent or more.

Can I remove PMI from my mortgage payment?

You can remove PMI from your monthly mortgage payment once you have 20% equity in your home. This can be done either by requesting its cancellation or refinancing the loan. Some types of loans do not allow you to make payments ahead of time specifically for the purpose of mortgage insurance removal.

How do I drop PMI on an FHA loan?

There are a few ways to drop PMI on an FHA loan. The best option is to make a larger down payment. If you put down at least 10% on an FHA loan, you’ll only have to pay PMI for 11 years. If you put down 22% or more, PMI will be automatically removed. Another option is to refinance your FHA loan into a conventional loan.