The Quick Read: Most homeowners with borrower-paid PMI on a conventional loan do not need to refinance to drop it. Four routes exist: wait for automatic termination at 78%, ask the servicer to cancel when the balance reaches 80% of the original value, ask for cancellation based on the home’s current value after appreciation or major improvements, or pay down principal to reach 80% sooner. Which one fits depends on loan age, loan-to-value, and who owns the loan.
Can You Really Skip the Refinance?
Yes, in most cases. Private mortgage insurance protects the lender, not you, and it is required on conventional purchase loans above 80% loan-to-value. Across the wholesale programs Lendmire places files with, that insurance cancels at 80% on request and ends at 78% automatically. A refinance is one way out. It is rarely the only way, and it comes with a new note and new closing costs.
Refinance savings and break-even estimate
The starting figures are an example value with a balance in proportion and a placeholder for costs. Replace them with yours, and enter the current rate from your statement.
Editable benchmark: 7.32% as of October 22, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $245,000 current balance, a current rate you enter and a remaining term seeded at twenty-five years, closing costs seeded at $5,000 as an editable placeholder (not a fee quote) and rolled into the new loan, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The new rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a refinance quote; a refinance is priced by the lender at lock, and the current rate, the remaining term and the closing costs are figures you enter. The current payment is estimated from the balance, the current rate and the remaining term; the break-even divides the closing costs by the monthly saving and ignores the interest effect of a longer term. On the VA IRRRL the funding fee is added to the loan unless the veteran is exempt. Taxes and insurance are editable estimates. Licensed in sixteen states for consumer mortgages; Lendmire is a broker, never the lender.
One scope note first. Everything below applies to borrower-paid mortgage insurance on conventional loans. If the insurance is built into your rate (lender-paid), the cancellation rights described here were not written for it. Ask your servicer which type you have. FHA mortgage insurance follows different rules, and Fannie Mae's consumer guidance notes it is more complicated and may involve refinancing.
Key Terms Defined
Original value: Generally the lower of the purchase price or the appraised value when you bought. If you refinanced, it is the appraisal from that refinance.
Loan-to-value (LTV): Your loan balance divided by the home's value, shown as a percentage.
Scheduled balance: What your balance is supposed to be on the original amortization schedule if you only make the required payments.
Servicer: The company you send your monthly payment to. It handles cancellation requests.
Seasoning: How long the loan has existed. Current-value cancellation rules depend on it.
BPO: A broker price opinion, a valuation a servicer may order instead of a full appraisal.
Which Path Fits Your Situation?
The path depends on where your equity came from. If it came from paying down the loan, use the original-value request. If it came from appreciation or renovations, the current-value route is the one to look at.
| Path | Who starts it | Trigger | Best for |
|---|---|---|---|
| Automatic termination | Servicer | Scheduled balance hits 78% of original value | Borrowers who never ask |
| Request at 80% | You | Balance reaches 80% of original value | Steady payers with no second lien |
| Current-value request | You | LTV test based on loan age | Homes that gained value |
| Extra principal | You | Balance drops to 80% sooner | Borrowers with spare cash |
Path One: Wait for Automatic Termination
The servicer must end the insurance on its own once the loan is scheduled to reach 78% of the original value, provided you are current on payments. Fannie Mae's Servicing Guide ties this date to the original amortization schedule. It also sets a backstop at the midpoint of the loan term if the schedule never reaches 78% before then.
Here is the catch. The 78% date comes from the original schedule, so early payments do not move it. They only move your 80% request date. Waiting costs you the months of premiums between 80% and 78%. Not ideal.
Path Two: Request Cancellation at 80% of Original Value
You have a federal right to ask. The CFPB says you can ask your servicer to cancel on the date your balance is scheduled to fall to 80% of the original value. The legal protections described there cover single-family principal residences that closed on or after July 29, 1999. Loans before that date fall under investor policy instead.
The servicer will want to see the following:
- A written request.
- A good payment history, and you are current.
- A certification that there are no junior liens.
- Evidence, such as an appraisal, that value has not dropped below the original value.
Your PMI disclosure form should show the first date you can ask. Check it before you call.
How the payment history is checked
Under Fannie Mae's rule, the loan must be current when you ask, with no payment 30 or more days late in the last 12 months and none 60 or more days late in the last 24 months. The look-back runs backward from the later of the date you hit the 80% point and the date of your request.
A simple request checklist
1. Confirm the PMI is borrower-paid and billed monthly.
2. Find your scheduled 80% date on the disclosure.
3. Pull your payoff balance and compare it to the original value.
4. Confirm you have no second mortgage or HELOC.
5. Send a written request, even though verbal requests are also accepted by both agencies. Written leaves a paper trail.
6. Keep paying until the servicer confirms in writing that the insurance is canceled.
That last step matters. Stopping early can put you behind on a payment.
Path Three: Use Appreciation or Improvements
Here the rules are investor policy, not federal law, and this is the route that helps most after prices rise. For a one-unit principal residence or second home, Fannie Mae and Freddie Mac use the same test:
- Loan seasoned between 2 and 5 years: LTV of 75% or less.
- Loan seasoned more than 5 years: LTV of 80% or less.
- Substantial improvements waive the 2-year seasoning, but LTV must then be 80% or less. Terms depend on the lender's guidelines, the property type, the leverage, and a full review of the credit profile.
Notice what this means. At 20% equity, you don't have enough in the 2-to-5-year window. You need 25%. Past five years, 20% works.
Valuation and who pays
For a one-unit home, Fannie Mae's escrow and insurance servicing rules have the servicer order an interior and exterior BPO, or an appraisal where the law requires one. The borrower pays, and the servicer only orders it after receiving the fee. For two- to four-unit properties, it calls for an appraisal.
If the value comes back lower than you expected, ask whether the servicer can review or appeal it. Fannie Mae's servicer tool allows an appeal of a completed valuation, though how a given servicer handles that varies.
What counts as an improvement
Freddie Mac's bulletin is clear that routine repairs that just maintain the property are not substantial improvements. A new roof to replace a worn one is maintenance territory. A finished addition or major renovation is a better candidate. Keep receipts, contracts, and permits either way. A servicer can decline a request when the paperwork reads like maintenance.
On loans under two years old, Freddie Mac says the servicer may approve a current-value request only if it finds the added value comes from substantial improvements.
A newer wrinkle
A law-firm summary from Orrick reports that Fannie Mae updated its requirements so servicers may proactively contact borrowers who could qualify for termination based on current value. "May" is the operative word. Servicers are not obliged to reach out, so ask.
Path Four: Pay Down Faster
Extra principal will not trigger the 78% date. It can, however, get your balance to 80% of original value sooner, and the CFPB confirms you can ask to cancel ahead of the scheduled date that way. Lendmire's piece Do Extra Principal Payments Remove PMI Sooner on a Conventional Loan? walks through that tradeoff.
A recast, where you make a lump-sum payment and the loan is re-amortized, does not remove PMI by itself. It can help you reach a threshold. You still have to make the request.
A Worked Example
Picture a homeowner who bought with 5% down on a primary residence, which sits within the 95% purchase leverage available on standard conforming loans, subject to lender guidelines. Insurance applies because the LTV started above 80%.
- Year one: LTV starts at 95% of original value.
- Years later, on schedule: balance drifts toward 80% of the original value, and the borrower can request cancellation.
- Alternate story: the home appreciates and the loan is past five years old. A BPO shows LTV at or under 80% of current value. The homeowner asks on the current-value route, years before the amortization schedule would have delivered 80%.
Same loan, two different clocks. The original-value clock ticks on the schedule. The current-value clock ticks on the market.
Where the Rules Change
The general rules break in a few named places:
- Two- to four-unit principal residences and investment properties. Fannie Mae's original-value request point is 70%, not 80%. Freddie Mac's non-HPA group uses 65%. Both sit below the one-unit test, so equity needs run higher.
- Second homes. Federal protections cover principal residences only. The agencies apply their own rules to second homes, using the same investor tests as above.
- Second mortgages and HELOCs. A junior lien blocks the request, since you must certify none exists. Paying it off or, in some cases, getting the lender to subordinate may change the answer, but that depends on the servicer.
- Interest-only periods, principal forbearance, or balloons. The CFPB says the midpoint-of-term standard is more likely to apply.
- Modified loans and disaster-affected borrowers. Fannie Mae's guide has separate sections for these. Details differ, so ask the servicer directly.
- Value declines. On the original-value route, a drop in value can stop cancellation on schedule.
If the Servicer Says No
A denial usually traces to one of a few causes. Match the reason to the fix.
| Reason given | What it usually means | What to do |
|---|---|---|
| Late payment on record | A late payment falls inside the 12- and 24-month look-back | Wait until it ages out of the window, then ask again |
| Second lien found | Junior lien blocks request | Pay it off or ask about options |
| LTV too high | Current-value test not met | Check seasoning tier; consider paying down |
| Value below expected | BPO or appraisal came in low | Ask about an appeal |
| "Not possible" | Servicer error or lender-paid MI | Ask who owns the loan and what type of MI you have |
Get every denial in writing. Ask which investor owns the loan, and cite the specific section of the investor's guide. A request that names the rule tends to get a more specific answer than a general one.
What Happens After Approval
Per Fannie Mae's termination rules, the servicer must notify you after termination and forward any unearned premium refund as soon as it is received. Exact timing varies by file and servicer. Where it applies, no further insurance escrow deposits are due. Check your next statement to confirm the charge is gone.
Cancel or Refinance? A Quick Decision Frame
Cancellation involves no new loan, no new note, and no new closing costs. The main out-of-pocket is usually the valuation fee on the current-value route. A refinance also resets the original value and writes a new loan, which can restart the clock on everything.
A refinance can still be the better answer when you want a different loan term or structure for reasons beyond PMI, or when your servicer's rules block cancellation. On a conventional rate-and-term refinance, wholesale programs allow up to 95% LTV on a one-unit primary residence, subject to lender guidelines. If PMI is the only goal, cancellation is typically the cleaner path.
Frequently Asked Questions
Does PMI drop off automatically at 80%?
No. At 80% of original value, you must ask. Automatic termination comes at 78%, based on the original schedule, provided you are current on payments.
Do I need an appraisal to cancel?
Not on the original-value request at 80%, though a servicer may want evidence that value has not fallen. On the current-value route, a BPO or appraisal is generally ordered at your expense.
Does home appreciation count toward canceling?
Under federal law, no, because the test uses original value. Fannie Mae and Freddie Mac policies allow current-value requests with seasoning and LTV conditions.
Can I remove PMI if I have a HELOC?
Probably not until it is resolved. The request requires certifying no junior liens, so a HELOC or second mortgage can block it.
Is lender-paid PMI canceled the same way?
Ask your servicer which type you have, because the rights described here are written for borrower-paid insurance. Do not assume lender-paid coverage follows the same rules.
Next Step
If you are weighing a refinance and want the break-even run on your own numbers, Lendmire can help you compare the programs on the same home. Homeowners can also review Lendmire's conventional loan programs to see how leverage and mortgage insurance work on each type of purchase or refinance, subject to lender guidelines and full file review. Nothing here is a commitment to lend.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae's consumer guidance
2. Fannie Mae Servicing Guide B-8.1-04
3. CFPB
4. Freddie Mac Guide Section 8203.2
5. Fannie Mae Servicing Guide F-1-02
6. Freddie Mac Bulletin 2021-37
7. Orrick
This article is part of Lendmire’s conventional loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Remove PMI on a Conventional Loan as a Move-Up Buyer · How to Get Preapproval for a Conventional Loan · How Much a Conventional Loan Refinance Costs vs PMI by Years Left
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.