The Quick Read: A refinance that removes PMI usually needs a new valuation, because the new loan is sized against today’s value instead of what the home was worth at purchase. If the new balance lands at 80% or less of that fresh value, the new loan carries no mortgage insurance. Some refinances use an automated value acceptance in place of a full appraisal, and some homeowners can drop PMI without refinancing at all. Which route fits depends on your goal, your loan’s age and what else is on the property.
Two Routes, Two Different Valuations
Most homeowners blur two separate events. Keeping them apart saves money.
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.
Route A: cancel PMI on the loan you already have. Your servicer reviews a request and, under investor rules, may order a valuation to confirm the value. No new loan is created. Your rate and term stay as they are.
Route B: refinance into a new loan. The new lender needs a value to set the loan-to-value ratio (LTV). That value becomes the new "original value." If the new loan is at or under 80% of it, no mortgage insurance applies.
Across the wholesale programs Lendmire places files with, the practical rule is simple. Cancelling is the cheaper first question. Refinancing is the right call when you also want to change the rate or term, or when your current servicer won't cancel on today's value.
| Goal | Valuation used | Result |
|---|---|---|
| Drop PMI, keep current loan | Servicer-ordered opinion or appraisal | No new loan, same terms |
| Refinance and drop PMI | New lender's appraisal or accepted value | New loan, new original value |
| Refinance, value acceptance offered | Automated value, no appraisal | Appraisal fee may be avoided |
Why a Higher Value Does Not Remove PMI by Itself
Federal law keys to the original value, not today's. The CFPB explains that you can ask your servicer to cancel once the balance is scheduled to reach 80% of the home's original value. You need a written request, a good payment history, current payments and no junior liens. You may also have to show the value has not fallen below the original value.
Automatic termination is separate. Fannie Mae's Servicing Guide ties it to the date your balance is first scheduled to reach 78% of original value, as long as you are current. So PMI does not drop on its own at 80%. You have to ask.
Appreciation counts only through investor rules, and only when you request it and a new valuation supports it.
How Current-Value Cancellation Works, Step by Step
1. Find your numbers. Compare your unpaid balance with your original value. For a purchase, that is generally the lower of price or appraisal. After a refinance, it is the appraised value at that refinance.
2. Confirm who owns the loan and what kind of PMI you have. Your servicer can tell you whether Fannie Mae or Freddie Mac owns it. Lender-paid mortgage insurance is generally not cancellable by the borrower.
3. Check seasoning, payment history and liens. Servicers look at loan age, whether you have paid on time, and whether a HELOC or second mortgage sits behind the first.
4. Make the request. Put it in writing, even where verbal requests are accepted.
5. The servicer orders the valuation. Depending on the investor, that is a broker price opinion or an interior and exterior appraisal. The borrower generally pays for it.
6. Get the effective date in writing. Keep paying until your servicer confirms PMI has stopped.
Fannie Mae's Lender Letter LL-2018-03 sets the LTV tests for a one-unit principal residence. The balance must be 75% or less of current value if the loan is two to five years old, and 80% or less after five years. If your own improvements raised the value, the two-year wait may be waived, but the 80% test still applies. That letter dates from 2018, so ask your servicer for the current standard.
Freddie Mac runs a similar framework. Its servicing guide allows a broker price opinion or an appraisal with an interior and exterior inspection. The test is tighter for two- to four-unit and investment properties.
What the Refinance Appraisal Does
In Route B, the new lender uses the valuation to set your LTV. That one number drives three things:
- Whether mortgage insurance is required. Conventional loans above 80% LTV carry it.
- Which leverage tier you can reach for your occupancy and purpose.
- Whether the pricing and program you want are available at all. Terms depend on the lender's guidelines, the property type, the leverage, and a full review of the credit profile.
On a conventional limited cash-out (rate-and-term) refinance of a one-unit principal residence, the wholesale programs Lendmire works with allow up to 95% LTV, and up to 97% where the existing loan is agency-owned and the first-time-buyer program allows it. Above 80%, mortgage insurance applies. A cash-out refinance tops out at 80% on a one-unit primary residence and 75% on two- to four-unit homes and second homes. Those are program ceilings, subject to lender guidelines and full file review.
Here is the math in plain terms. Say your home was worth 100 when you bought it and you owed 95. It now appraises at 120, and you owe 90. That is 75% of current value. A new loan at that balance would sit under the 80% line, so no mortgage insurance. Your original value for the new loan becomes 120.
Now flip it. If the appraisal comes in at 105, you owe 90 on a 105 value, which is about 86%. Mortgage insurance would still apply on a new loan. The same low number could also stop a servicer cancellation.
Can the Appraisal Be Skipped?
Sometimes. On certain rate-and-term and limited cash-out refinances, Fannie Mae's underwriting system can offer value acceptance, which accepts an estimate of value based on its appraisal database. Three limits matter:
- It is offered only on eligible transactions. You cannot request it.
- If the lender has already obtained an appraisal, the offer cannot be used.
- It is not offered if an appraisal was uploaded to the system from any lender in the prior 120 days.
The Appraisal Institute reports that waivers are common on no-cash-out refinances. Even so, the appraisal fee is one relatively small closing cost. Don't build a refinance decision around it.
Ordering your own appraisal before you apply is a gamble. A new lender generally orders its own, and a separate report may not carry over.
Where the General Rule Breaks
- Value below original. Fannie Mae's guide denies a cancellation request if the valuation comes in below the original value, unless you pay the balance down enough.
- Second liens. A HELOC behind your first mortgage blocks a statutory cancellation request. Count it when you calculate equity.
- Two- to four-unit homes. The statutory rights cover single-family principal residences. Investor thresholds for multi-unit homes are lower and stricter.
- Substantial improvements. Servicers may waive the seasoning wait if renovations drove the gain. Improvements generally must conform to local zoning and building rules, and the valuation must be done after they are finished.
- Lender-paid or government insurance. Lender-paid MI is generally not borrower-cancellable. FHA mortgage insurance follows different rules, and the usual exit is a conventional refinance.
- Loans before mid-1999. The federal rights apply to loans closed on or after July 29, 1999, though some servicers cancel under their own standards.
Does Refinancing Make Sense Here?
Start with the cheaper question: can your servicer cancel on current value? If yes, you keep your existing terms and avoid a new loan's closing costs. Only a valuation fee is involved.
Refinance when you also want a different term, when your current loan's terms are worth replacing, or when the servicer's test won't work for you. Weigh the full closing costs of a new loan against the monthly premium you would stop paying. Mortgage insurance premiums typically run roughly 0.58% to 1.86% of the balance annually, a published range and not a quote. Divide your total refinance costs by the monthly savings to find the break-even.
If the refinance is partly about cash, the same appraisal shapes how much equity you can reach. Lendmire's guide How to Refinance a Mortgage for Cash Out After Your Home Value Rises walks through that side. For homeowners comparing conventional loan programs, the wholesale lender's decision score floor of 620 and a total ratio ceiling of 50% on most automated findings frame what the file can support.
If the Appraisal Comes In Low
A low number is a setback, not a dead end. In practice:
1. Ask for the report and read the comparable sales used.
2. Look for factual errors: square footage, bedroom count, missed upgrades.
3. Submit a written reconsideration with better comparable sales through your loan officer. For servicer cancellations, Fannie Mae's system supports an appeal of a completed valuation.
4. If the value stands, pay the balance down to reach the threshold, or wait for more principal reduction.
5. If you owe a bit more than the threshold, ask whether a smaller refinance balance gets you there.
To help the appraiser, gather a list of improvements with dates, keep the home clean and accessible, and note recent sales nearby.
Key Terms Defined
Original value: the lower of the purchase price or appraisal at purchase, or the appraisal at your last refinance.
LTV (loan-to-value): your loan balance divided by the home's value, shown as a percentage.
Value acceptance: an automated offer that lets certain refinances proceed without an appraisal.
Seasoning: how long you have held the loan, which affects current-value cancellation tests.
Broker price opinion (BPO): a lower-cost estimate of value that servicers may use for cancellation requests.
Frequently Asked Questions
Do I have to refinance to remove PMI if my home value went up?
No. Your servicer may cancel on current value if you meet the investor's LTV, seasoning and payment-history tests and have no second liens. Ask first, because cancelling keeps your existing terms and avoids a new loan's closing costs.
Will a refinance always require an appraisal?
Not always. Eligible rate-and-term and limited cash-out refinances may receive a value acceptance offer in place of an appraisal. The offer is not available if the lender already ordered an appraisal or one was uploaded to the system in the prior 120 days.
Does PMI drop automatically once I reach 80% equity?
No. At 80% of original value you must request cancellation. Automatic termination applies at 78%, and only if you are current on payments.
Can I use online estimates or neighbor sales instead of an appraisal?
Generally no. Online estimates and neighborhood comparisons help you judge whether to ask, but servicers and lenders rely on a BPO, an appraisal or an accepted automated value.
What if I have a HELOC or second mortgage?
A subordinate lien typically blocks a cancellation request. A refinance can combine or pay off the second lien, but the combined balance counts toward LTV, so the new loan may still carry mortgage insurance.
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.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender's guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. CFPB – When can I remove PMI
2. Fannie Mae Servicing Guide B-8.1-04
3. Fannie Mae Lender Letter LL-2018-03
4. Freddie Mac Guide Section 8203.2
5. Fannie Mae Property Valuation FAQ
6. Appraisal Institute news release
This article is part of Lendmire’s conventional loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Does a Conventional Cash-Out Refinance Always Require an Appraisal? · Cash-Out Refinance PMI Rules for a 2-4 Unit Primary Home · How to Pull Cash Out of a Home With a Conventional Cash-Out Refinance
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.