PMI after a refinance: HPA cancellation at 80% vs refinancing just to drop it

The HPA lets you cancel PMI at 80% of the home’s original value and ends it automatically at 78%, so refinancing only to drop PMI is often unnecessary; a refinance also resets “original value,” for better or worse.

Before you refinance: what the HPA already gives you

On a conventional loan you may request cancellation once the balance reaches 80% of the original value — the lesser of the purchase price and the appraisal at origination — either on the original amortization schedule or through extra payments, provided you are current, have had no 30-day late in the past 12 months or 60-day late in the past 24, have no junior lien, and can certify the value has not declined (the servicer may require an appraisal at your expense). At 78% on schedule the servicer must terminate PMI automatically if you are current, and at the midpoint of the term regardless of balance. Fannie Mae and Freddie Mac go further than the statute: they allow cancellation based on a current value when the loan is between two and five years old and the LTV is 75% or less, or 80% after five years, or 80% at any time if improvements raised the value.

Run that request first. A written cancellation request and a $400 to $600 appraisal almost always cost less than a refinance whose only purpose is to shed a $150 monthly premium.

What a refinance does to the HPA clock

A refinance is a new residential mortgage transaction. Its original value becomes the appraised value at the refinance, and the 80%/78% milestones are recomputed on the new amortization schedule. If your home rose in value, refinancing at 78% LTV on the new appraisal closes with no PMI at all; if you refinance at 85% LTV on a rate-and-term loan, you get new PMI with a new cancellation schedule — and the servicer must give you a fresh initial disclosure showing the dates at which you may request cancellation and at which it terminates automatically, plus an annual reminder. Lender-paid mortgage insurance is different: it is built into the rate, cannot be cancelled, and refinancing is the only way out once your equity justifies it.

FHA and VA: where the Act does not reach

The HPA covers private mortgage insurance only. FHA’s annual mortgage insurance premium runs for the life of the loan when the original down payment was under 10% (11 years otherwise), and VA loans carry a one-time funding fee rather than monthly insurance. That is why so many FHA homeowners refinance into a conventional loan at roughly 80% LTV: it is the only cancellation mechanism they have. Compare the full cost — a conventional loan at 80.1% LTV needs PMI again — and remember that an FHA-to-FHA Streamline keeps the MIP, while a refinance of an FHA loan endorsed before mid-2013 may still carry cancellable MIP on its own terms.

Ask the new lender for a side-by-side: your current PMI or MIP cost, the earliest HPA or investor cancellation date on the existing loan, and the total cost of the refinance including any new insurance. If the numbers favor staying, put the cancellation request in writing to your servicer today.

What to check

• Before refinancing to remove PMI, send a written cancellation request at 80% of original value, or at 75% to 80% of current value under Fannie/Freddie rules.
• Check the new loan’s LTV on the refinance appraisal: 80% or below closes without PMI, anything above restarts insurance on a new schedule.
• FHA annual MIP is outside the HPA; a refinance into conventional at 80% LTV or below is the usual exit, an FHA Streamline is not.
• Keep the initial PMI disclosure from the new loan; it lists the automatic termination date and the cancellation rights you can act on later.

Frequently asked questions

My home went up in value. Do I have to refinance to get rid of PMI?

Usually not on a conventional loan. The HPA is based on original value, but Fannie Mae and Freddie Mac permit servicers to cancel on a current appraisal or broker price opinion when the LTV is 75% or lower after two years, or 80% after five years. Ask your servicer for its written procedure, expect to pay for the valuation, and stay current on payments. Refinancing adds closing costs to solve a problem a letter may solve.

I refinanced from FHA to conventional at 82% LTV. When can I cancel the new PMI?

The HPA clock restarts with the refinance: original value is the refinance appraisal, and you may request cancellation when the balance reaches 80% of it by schedule or through extra principal payments, with automatic termination at 78% if you are current. Under investor rules a new appraisal showing 75% LTV after two years may also work. The disclosure you received at closing lists the projected dates.

The rule in full: Homeowners Protection Act (PMI cancellation). The borrower profile: Refinancing homeowners. Related guides: Rate-and-term refinance: when it pays, how to compute the break-even · Cash-out refinance: limits, costs and when it is the wrong tool · PMI removal: the 80% request, the 78% automatic cancellation, and the appraisal route · PMI for first-time buyers: what it costs and how to get rid of it.

Other federal rules for refinancing homeowners

TILA / Reg Z · RESPA · TRID disclosures · ECOA · Fair Housing Act · HMDA · SAFE Act / NMLS · ATR / QM · HOEPA · Servicing rules · FCRA · Flood insurance · MARS rule · SCRA · LO compensation

HPA / PMI for other borrowers

First-time buyers · Conventional borrowers · Veterans · Self-employed · Investors · Retirees · Bad credit · Foreign nationals · Physicians · Heroes · Rural buyers · Condo & second home