FAQs

Private mortgage insurance (PMI) is an insurance that most people are required to buy when they have a conventional mortgage loan with a down payment of less than 20% of the home’s purchase price. PMI insures the lender - not the borrower - if the borrower stops making mortgage payments. The borrower does not receive any protections from their PMI expenses. 

PMI may be billed monthly or annually. It is calculated as a percentage of the mortgage balance - usually 0.5% - 1.5% annually, according to the Urban Institute.

In most cases, your mortgage servicer must automatically cancel your PMI when your mortgage balance is 78% of your home’s original value (based on the appraisal for your mortgage). Furthermore, you can request your mortgage servicer to drop your PMI once your mortgage balance is less than 80% of your home’s original value.

You can also remove PMI based on the current valuation of your home. The current loan-to-value (LTV) ratio you need to remove PMI depends on the age of your mortgage:

• If your mortgage is 2 - 5 years old, you need a current LTV ratio of 75% or lower

• If your mortgage is at least 5 years old, you need a current LTV ratio of 80% or lower

• If your mortgage is less than 2 years old, you are only eligible to remove PMI if you’ve made “substantial improvements” to the home and your LTV ratio is 80% or lower
  

You must also be current on your mortgage with good payment history. This means:

• No payment 30 days or more past due in the past 12 months

• No payment 60 days or more past due in the past 24 months
  

Note: these guidelines are based on conforming conventional loans from Freddie Mac and Fannie Mae. Other lenders may have different requirements for their conventional loans.

You must contact your mortgage servicer to request your PMI be removed. Your servicer will check if you are eligible based on the age of your loan and your payment history. To remove PMI based on current home valuation, your servicer will need to order a broker price opinion (BPO) or an appraisal. Your servicer decides which option to request and will pass the cost of the BPO or appraisal on to you. BPOs are generally $150, while appraisals can cost $600 or more. An appraisal may require you to schedule an appraiser visit to your home. Appraisals do not impact your tax assessment. Your servicer must order the appraisal, you cannot bring your own appraisal to the servicer.

Note: these guidelines are based on conforming conventional loans from Freddie Mac and Fannie Mae. Other lenders may have different requirements for their conventional loans.

Your mortgage servicer is the company that collects your monthly mortgage payments. Sometimes this is the same company as your mortgage lender, often it’s a different company.

You can search for your mortgage servicer in the Mortgage Electronic Registration System (MERS). More than two-thirds of mortgages are tracked in MERS.

Both Freddie Mac and Fannie Mae have public portals to look up if either owns your loan.

Freddie Mac loan look-up

Fannie Mae loan look-up

Mortgage insurance premium (MIP) is unique to FHA and USDA loans. MIP is required on all FHA and USDA loans. Similar to PMI, MIP insures the lender - not the borrower - if the borrower stops making mortgage payments. The borrower does not receive any protections from their MIP expenses. 

However, MIP generally lasts the life of the loan, unless the borrower made a down payment of at least 10% or the loan was originated before June 3, 2013. In other cases, the only way to remove MIP is to refinance into a conventional mortgage.