Homeowners who purchased with less than 20% down payment are burdened with private mortgage insurance (PMI). Refinancing after market appreciation permanently cancels this fee.
1. PMI Cancellation Pathways
- Homeowner Protection Act of 1998 (HPA): Lenders must automatically cancel PMI once the loan reaches 78% original LTV based on the original amortization schedule.
- New Appraisal Refinance: If local home prices have appreciated by 15%–25%, refinancing into a new conventional note at ≤ 80% LTV cancels PMI immediately.
- FHA MIP Elimination: FHA mortgage insurance (MIP) is permanent for the life of the loan if originated with < 10% down. The only way to eliminate FHA MIP is refinancing into a conventional loan.