When Can I Stop Paying Mortgage Insurance?

Mortgage insurance can add hundreds of dollars to your monthly payment, but the good news is that it doesn’t have to last forever. Understanding when and how to remove this expense could save you thousands over the life of your loan.

The quick answer: On a conventional loan (backed by Fannie Mae or Freddie Mac), you can typically stop paying mortgage insurance once your loan balance drops to 80% of your home’s original purchase price. In most cases, lenders must automatically cancel it at 78%, but knowing your options can help you eliminate this cost even sooner.

Let’s explore exactly how mortgage insurance works, when you can remove it, and the strategies that could help you stop paying it as quickly as possible.

What are you paying for when you have mortgage insurance?

Mortgage insurance serves a specific purpose in the home buying process. When you purchase a home with less than 20% down, lenders face additional risk. Mortgage insurance protects them (not you) if you’re unable to make your loan payments. While this insurance enables many people to buy homes sooner without waiting to save a full 20% down payment, it’s an extra cost that can significantly impact your monthly budget.

According to Zillow data, 38% of homeowners were paying mortgage insurance in 2023. If you’re among them, you’re likely paying between 0.5% and 1.5% of your loan amount annually, divided into monthly premiums. On a $300,000 loan, that translates to $125 to $375 every month — or $1,500 to $4,500 per year. The key to eliminating this expense lies in understanding what type of mortgage insurance you have and the specific rules that let you stop paying the additional monthly fee.

What type of mortgage insurance do you have?

Not all mortgage insurance is created equal. The type you’re paying directly determines when and how you can remove it. Understanding which type of mortgage insurance you have is the crucial first step toward removing it.

If you’re not sure, your monthly mortgage statement should clearly indicate whether you’re paying PMI, MIP, or another fee. You can also contact your loan servicer (the company you send payments to) for clarification. Here’s what you need to know about each kind of mortgage insurance.

If you have a conventional loan, you’re paying PMI.

PMI, or private mortgage insurance, is the most common type of mortgage insurance and the easiest to remove. PMI is typically required by lenders when your down payment is less than 20% of the home’s purchase price. 

For example, if you bought a $400,000 home with 10% down ($40,000), your initial loan of $360,000 represents 90% of the home’s value. The lender requires PMI to offset the risk of that higher loan-to-value ratio (LTV).

When can you stop paying PMI? 

Unlike some other types of mortgage insurance, PMI is designed to be temporary. Under the Homeowners Protection Act of 1998 (also called the PMI Cancellation Act), you have clear rights regarding when and how this insurance can be removed.

You can request PMI removal once your loan balance reaches 80% of your home’s original value. If you don’t request removal yourself, your lender is legally required to automatically cancel it when your balance hits 78% (as long as you’re current on your payments).

If you have an FHA loan, you’re paying MIP.

MIP, short for mortgage insurance premium, applies to FHA loans (a mortgage insured by the Federal Housing Administration). FHA loans are designed to help buyers with lower credit scores or smaller down payments, but they come with stricter mortgage insurance rules.

How is MIP different from PMI?

For most FHA loans originated after June 2013, MIP lasts for the entire life of the loan if you put down less than 10%. That’s right, even when you build substantial equity, that monthly premium stays in place until you pay off the loan or refinance to a conventional mortgage.

When can you stop paying MIP?

If you made a down payment of 10% or more on your FHA loan, you can have MIP removed after 11 years. However, this scenario is less common since many FHA borrowers choose these loans specifically because they can’t afford a larger down payment.

The annual MIP rate for most FHA loans is 0.85% of the loan amount, which means on a $300,000 loan, you’re paying about $213 per month or $2,556 annually — a substantial ongoing cost.

Other loan types and their insurance requirements

• VA loans: Are available to eligible veterans, active-duty service members, and some surviving spouses. VA loans don’t require ongoing mortgage insurance. Instead, they charge a one-time funding fee at closing. This fee typically ranges from 1.4% to 3.6% of the loan amount, depending on your down payment and whether you’ve used your VA loan benefit before. Once you pay this upfront fee, there’s no monthly mortgage insurance.
• USDA loans: Are designed for rural property buyers and charge annual guarantee fees, which function similarly to mortgage insurance. Like FHA loans, these fees typically last for the life of the loan. To eliminate them, you’ll generally need to refinance to a conventional loan once you’ve built sufficient equity.

When does mortgage insurance go away?

The timeline for mortgage insurance removal depends on several factors: your loan type, how quickly you’re building equity, and whether you take proactive steps to accelerate the process.

The 80% equity threshold

For conventional loans with PMI, the magic number is 80% LTV. This means when your remaining loan balance drops to 80% of your home’s original purchase price, you’ve reached the point where you can request PMI removal.

Let’s walk through a real example. Suppose you bought a home for $350,000 with a 5% down payment ($17,500):

• Original loan amount: $332,500
• 80% of purchase price: $280,000
• Equity needed: $70,000, or 20% of the purchase price

How long will it take to reach this milestone? For a standard 30-year mortgage at 7% interest, you’d reach 80% LTV after about 11 years of regular payments. However, you can accelerate this timeline significantly through extra principal payments or if your home’s value increases.

Automatic cancellation at 78%

Even if you don’t actively request PMI removal at 80%, federal law requires automatic cancellation at 78% LTV. This protection exists because lawmakers recognized that many homeowners weren’t aware of their right to request removal.

Using our previous example of a $350,000 home, automatic cancellation would occur when your loan balance drops to $273,000. For that same mortgage with regular payments, this typically happens about 6 to 12 months after you reach the 80% threshold.

The midpoint rule

Here’s a provision many homeowners don’t know about: For conventional loans, federal law also requires mortgage insurance removal at the midpoint of your loan term, regardless of your loan balance. For a 30-year mortgage, that’s after 15 years of on-time payments. For a 15-year mortgage, it’s after 7.5 years.

This protection is particularly valuable if you have an interest-only loan or a loan that isn’t amortizing as quickly as expected. Even if your LTV hasn’t reached 78% because of how your loan is structured, the insurance still comes off halfway through the term.

While most homeowners reach the 78% threshold well before the midpoint, this rule provides important consumer protection in unusual circumstances.

How do you speed up mortgage insurance removal?

You can get mortgage insurance removed faster by refinancing, getting a new appraisal or paying down your mortgage sooner.

Strategy 1: Refinance to remove mortgage insurance

Refinancing to a new conventional loan can remove PMI immediately if you’ve built sufficient equity through home appreciation, principal payments, or both. This strategy works particularly well if:

• Your home has appreciated significantly: If your home is now worth substantially more than you paid, you may have enough equity to refinance into a loan without PMI requirements.
• Interest rates have dropped: If you can secure a lower interest rate while removing PMI, you could see significant monthly savings. Even if rates are similar, eliminating PMI alone could justify refinancing. View current mortgage rates from Zillow Home Loans.*
• You want to switch from FHA to conventional: This is the primary way FHA borrowers can eliminate MIP before the loan term ends.

Important considerations: Refinancing comes with closing costs typically ranging from 2% to 6% of your loan amount. On a $300,000 loan, that’s $6,000 to $18,000. Calculate your break-even point — how long it takes for monthly savings to exceed your upfront costs.

Strategy 2: Order a new appraisal

If your home’s value has increased significantly since purchase, a new appraisal could help you remove PMI sooner without refinancing. This strategy works best when:

• Your area has seen strong appreciation: Neighborhoods with high demand and rising prices give you the best chance of a favorable appraisal.
• You’ve made substantial improvements: Major renovations like kitchen remodels, bathroom updates, or room additions can boost your home’s value meaningfully.
• You’re at least two years into your loan: Many lenders won’t consider removing PMI based on appreciation alone until you’ve made payments for at least two years. This requirement helps ensure that short-term price fluctuations don’t dictate insurance decisions.
• The math needs to work: To remove PMI based on current value, you typically need your LTV to drop to 75% or lower (not just 80%). Lenders apply stricter requirements when using current value rather than original purchase price.

Cost consideration: Appraisals cost $300 to $600, but if successful, you’ll recoup this investment quickly through monthly savings.

Strategy 3: Make extra principal payments

Adding extra money toward your mortgage principal accelerates equity building and can help you reach 20% equity faster. Even modest additional payments compound over time.

How much difference can extra payments make? Let’s look at an example:

Original scenario:

• Loan amount: $320,000
• Interest rate: 7%
• Monthly payment: $2,130 (principal and interest)
• Time to 80% LTV with regular payments: approximately 8 years

With an extra $200 monthly:

• New time to 80% LTV: approximately 6 years
• Time saved: 2 years
• Total interest saved: approximately $23,000

When keeping mortgage insurance might actually make sense

While removing PMI saves money immediately, there are situations where maintaining it (or not rushing to remove it) could be the smarter financial decision.

Low interest rate consideration

If you secured a historically low interest rate on your current mortgage (say, 3% or lower during the 2020-2021 period), refinancing to remove PMI might not make financial sense if current rates are significantly higher. Running the numbers is essential.

For example, if your current rate is 3.5% and today’s rates are 7%, that 3.5% rate difference on a $300,000 loan costs about $875 extra per month. Even if you’re paying $200 monthly in PMI, keeping your low rate is far more economical than refinancing to a higher rate just to remove insurance.

Investment opportunity costs

If you’re considering making large extra payments to accelerate PMI removal, consider alternative uses for that money:

• Higher-interest debt payoff: If you have credit card debt at 18% or 20% interest, paying that off first provides a better guaranteed return than prepaying a mortgage at 7% interest.
• Retirement contributions: If you’re not maximizing employer 401(k) matches, that guaranteed 50% or 100% return typically outweighs the benefit of earlier PMI removal.
• Emergency fund building: Financial advisors typically recommend 3-6 months of expenses in an emergency fund before aggressively paying down debt (including mortgages).

Market timing and appraisal risk

If you’re considering ordering a new appraisal to remove PMI based on appreciation, timing matters. In a declining or uncertain market, you risk paying $400-$600 for an appraisal that still shows insufficient equity for removal.

Wait for clear evidence of appreciation in your area — such as comparable home sales data showing values have risen meaningfully — before investing in an appraisal.

What to consider before removing mortgage insurance

Is the PMI tax deduction worth it?

PMI is deductible for homeowners who itemize starting with 2026 returns. For past tax years, mortgage insurance premiums have been tax-deductible for eligible homeowners. However, this deduction:

• Phases out for higher income levels (typically starting around $100,000 adjusted gross income)
• Is subject to congressional renewal and has expired in some years
• Requires itemizing deductions, which many homeowners no longer do after the increased standard deduction
• Applies only to contracts issued after 2006

Consult with a tax professional about your specific situation, but don’t rely on tax deductibility as a reason to keep paying PMI unnecessarily.

Is your total potential savings worth keeping PMI?

Before pursuing any strategy to remove PMI, calculate the real dollar impact. Consider:

• Monthly savings: Your current PMI premium
• Annual savings: Monthly amount × 12
• Lifetime savings: Annual savings × remaining years until natural 78% LTV achievement
• Strategy costs: Appraisal fees, refinancing closing costs, or other expenses
• Net benefit: Lifetime savings minus strategy costs

This calculation helps you determine whether active removal strategies justify their costs or if waiting for automatic cancellation makes more sense.

Are you in a high-appreciation state?

States with rapidly appreciating real estate markets — such as Texas, Florida, Arizona, Idaho, and parts of the Southeast — often enable homeowners to remove PMI more quickly through appreciation alone. If you’re in a high-growth market, monitoring local comparable sales could reveal opportunities for early PMI removal through reappraisal.

Are you in a declining market?

In areas where home values have declined or remained stagnant, reaching PMI removal through appreciation becomes more challenging. You’ll rely more heavily on principal paydown through regular and extra payments. View current home values for your market.

Mortgage insurance removal checklist

Before you contact your lender about PMI removal, verify you meet these requirements:

Loan type and equity checkpoints:

• You have a conventional loan with private mortgage insurance (PMI)
• Your loan balance is 80% or less of your home’s original purchase price (or 75% or less based on current appraised value)
• You’ve made mortgage payments for at least two years (if requesting removal based on current value)

Payment and property requirements:

• You’re current on all mortgage payments
• You have no late payments in the past 12 months (some lenders require 24 months)
• You have no second mortgages, HELOCs, or other liens on the property
• Your property is in good condition with no major needed repairs

Documentation prepared:

• Written request for PMI cancellation prepared
• Recent mortgage statement showing current loan balance
• Payment history documentation (if requested)
• New appraisal or BPO (if required by lender)
• Proof of homeowners insurance
• Property tax payment verification

*Zillow Home Loans; an equal housing lender. NMLS #10287