Can I remove PMI from my mortgage?

Yes. Under the Homeowners Protection Act, you can request PMI cancellation when your balance reaches 80% of the original value. It cancels automatically at 78%. If your home has appreciated, a new appraisal may allow earlier removal.

Does FHA mortgage insurance ever go away?

For FHA loans with less than 10% down, MIP lasts the life of the loan. To eliminate it, you must refinance into a conventional loan once you have at least 20% equity. With 10% or more down, MIP cancels after 11 years.

How much does PMI add to my monthly payment?

PMI typically adds between 0.2% and 1.5% of the loan amount annually. On a $350,000 loan at 0.75%, that is about $219 per month. Your exact rate depends on credit score, down payment, and insurer.

Is mortgage insurance the same as homeowner's insurance?

No. Homeowner's insurance protects you from damage to your property. Mortgage insurance protects the lender if you default. Both may be required, but they are entirely separate products.

Mortgage Insurance: PMI vs MIP Explained

Mortgage insurance is one of the most misunderstood costs in homebuying. Many buyers are surprised to find it on their monthly statement, and even more are uncertain about when or whether they can get rid of it. Coventry Enterprises LLC Loans explains the different types of mortgage insurance, what they cost, and your options for avoiding or eliminating them.

Why Mortgage Insurance Exists

Mortgage insurance protects the lender, not the borrower, if the borrower defaults and the foreclosure sale does not fully cover the loan balance. When a borrower puts less than 20 percent down, there is a higher statistical risk of default and a smaller equity cushion to absorb losses. Mortgage insurance compensates the lender for taking on that added risk.

From the borrower's perspective, mortgage insurance is the cost of getting into a home sooner with less cash down. Without it, most lenders would simply not offer low-down-payment loans.

PMI: Private Mortgage Insurance (Conventional Loans)

PMI applies to conventional loans where the down payment is less than 20 percent. It is provided by private insurance companies (hence "private" mortgage insurance).

How Much Does PMI Cost?

PMI typically costs between 0.2 and 2.0 percent of the original loan amount per year, depending on your credit score, down payment, loan type, and insurer. A common estimate for a borrower with good credit and 5 to 10 percent down is about 0.5 to 1.0 percent annually.

Example: On a $350,000 loan at 0.75% PMI, that is $2,625 per year, or about $219 per month added to your payment. On a $500,000 loan at 0.6%, it is $3,000 per year ($250/month).

PMI Cancellation Rules (Homeowners Protection Act)

The Homeowners Protection Act (HPA) of 1998 gives borrowers clear rights regarding PMI cancellation on conventional loans:

Borrower-requested cancellation: You can request cancellation when your loan balance reaches 80% of the original purchase price or appraised value (whichever was lower at origination). You must be current on payments and have a good payment history.
Automatic cancellation: The lender must automatically cancel PMI when your balance reaches 78% of the original value, based on the original amortization schedule, as long as you are current.
Final termination: If PMI has not been cancelled earlier, it must end at the midpoint of your loan term (year 15 on a 30-year loan) if you are current.

If your home has appreciated significantly, you may be able to request cancellation sooner based on a new appraisal showing current LTV at or below 80%. The lender may require a formal appraisal at your expense (typically $400 to $700).

MIP: Mortgage Insurance Premium (FHA Loans)

FHA loans require mortgage insurance regardless of your down payment. This is called MIP and comes in two components:

Upfront MIP (UFMIP)

1.75% of the loan amount, due at closing but can be financed into the loan. On a $300,000 FHA loan, that is $5,250 upfront, or added to your loan balance.

Annual MIP

Paid monthly as part of your mortgage payment. For most 30-year FHA loans with down payments under 10%, the annual MIP is 0.55% of the outstanding loan balance.

Example: On a $295,000 FHA loan (after financing the upfront MIP), annual MIP at 0.55% = $1,622.50 per year, or about $135 per month.

How Long Does FHA MIP Last?

If you put less than 10% down: MIP lasts for the life of the loan. The only way to remove it is to refinance into a conventional loan once you have sufficient equity.
If you put 10% or more down: MIP falls off after 11 years.

VA Funding Fee

VA loans do not have mortgage insurance in the traditional sense, but they do have a one-time VA funding fee. This fee is paid to the Department of Veterans Affairs and funds the VA home loan program. It ranges from 1.25% to 3.3% of the loan amount, depending on down payment and whether it is your first use of the VA benefit. Certain veterans (those with a service-connected disability rating) are exempt from the funding fee. The fee can be financed into the loan.

USDA Guarantee Fee

USDA loans have a guarantee fee structure similar to FHA MIP. There is an upfront guarantee fee of 1.0% of the loan amount (can be financed) and an annual fee of 0.35% paid monthly. These rates are considerably lower than FHA MIP for most borrowers.

Lender-Paid PMI (LPMI)

Some lenders offer to pay the PMI premium in exchange for a slightly higher interest rate on your loan. This is lender-paid PMI (LPMI). It eliminates the separate line item on your statement, but the cost is embedded in your rate. Benefit: no monthly PMI line item. Drawback: the higher rate is permanent, while borrower-paid PMI eventually cancels. LPMI tends to benefit buyers who plan to sell or refinance within a few years before they would have reached the 80% LTV cancellation threshold.

Single-Premium PMI

You can also pay PMI as a single lump sum at closing instead of monthly. This eliminates the ongoing monthly cost, but requires more cash at closing. Some sellers or lenders will pay single-premium PMI as a concession. If you plan to stay in the home long-term, this can be cost-effective. If you sell or refinance before the amortized single premium is "used up," you lose the remaining balance.

How to Avoid Mortgage Insurance Entirely

Put 20% down: The most straightforward path. No PMI on conventional loans, no MIP on FHA (though FHA at 20% down still has upfront MIP).
Piggyback loan (80-10-10): Take an 80% first mortgage, a 10% second mortgage (HELOC or home equity loan), and put 10% down. Neither loan requires PMI, though the second mortgage carries a higher rate.
VA or USDA loans: Eligible borrowers avoid traditional PMI/MIP through these programs.
Lender-specific programs: Some lenders and credit unions offer low-down-payment conventional loans without PMI for borrowers with strong credit profiles. These may have other requirements or rate adjustments.

Understanding mortgage insurance lets you make informed decisions about loan type and down payment. Coventry Enterprises LLC Loans encourages you to calculate the total monthly cost including PMI or MIP, and to understand your cancellation rights so you can act promptly when the threshold is reached.