The short answer
Refinancing gets rid of PMI if your new loan is 80% or less of your home's current value. But refinancing for PMI alone rarely pays off: closing costs of 2% to 5% can take four to nine years of PMI savings to earn back. For most conventional loans, asking your servicer to cancel PMI based on a new appraisal is far cheaper. Refinancing makes the most sense when it also lowers your rate, or when your mortgage insurance won't come off any other way.
How refinancing removes PMI
A refinance replaces your current loan with a new one. Your old loan, and the PMI attached to it, gets paid off. If the new loan is 80% or less of your home's appraised value, lenders generally won't require PMI on it.
That's the whole mechanism. Simple, but not free.
The break-even math
Picture a family five years into a $360,000 loan at 6.5%, with PMI at $150 a month. They owe about $337,000. Their home, bought for $400,000, is now worth $450,000. Their balance is 75% of current value, comfortably under 80%.
A refinance would remove PMI. Here's what it costs:
| Closing costs | Months of PMI savings to break even |
|---|---|
| 2% ($6,740) | About 45 months, almost 4 years |
| 3% ($10,110) | About 67 months, more than 5½ years |
| 5% ($16,850) | About 112 months, more than 9 years |
Those break-even points assume the new rate is the same as the old one. A lower rate shortens them. A higher rate can make them never arrive.
Want to see the math with your own numbers? A free payoff projection lays it out.
The cheaper move to try first
That same family may not need to refinance at all. Their loan is more than five years old, and under common Fannie Mae and Freddie Mac guidelines, they can ask to cancel PMI once their balance is 80% or less of current value. At $337,000, they'd need the home to appraise for about $421,250. It's worth $450,000.
The cost of that route: usually a few hundred dollars for an appraisal. Compared with $6,740 to $16,850 in closing costs, it's not close. See whether a new appraisal can remove PMI.
When refinancing to remove PMI does make sense
Rates have dropped. If you can lower your rate meaningfully, you get the rate savings and lose PMI in the same move. The combined savings can earn back closing costs quickly.
You have lender-paid PMI. It's built into your rate and never comes off. Refinancing is the only exit.
You have FHA mortgage insurance. For most FHA borrowers with less than 10% down, MIP lasts for the life of the loan. Refinancing into a conventional loan is the main way out. See how to remove FHA mortgage insurance.
Your lender won't cancel based on current value. Some loans aren't covered by the Fannie Mae and Freddie Mac guidelines. If your servicer won't accept a new appraisal, refinancing may be the only path.
Watch out for the reset
If you refinance, don't automatically take a new 30-year loan. Restarting the clock years into your mortgage can cost tens of thousands in extra interest, even at a lower rate. Choose a term that matches or shortens the years you have left. We show the math in recast vs. refinance.
After the PMI is gone
However you remove it, the money you were paying for PMI is now yours. Send it to principal, and it keeps working. For every way to drop PMI, see PMI explained.
If you're carrying other debts at higher rates, the Zero Debt Method can help clear them, freeing up even more each month.
And if you'd like the whole mortgage gone sooner, Ridgewell's Mortgage Accelerator Program is designed to help qualifying households pay off a home in as little as 5 to 7 years.
Payoff timelines are illustrations for qualifying households and are not guaranteed.
Where to start
Before you call a refinance lender, call your current servicer. Ask whether they'll cancel PMI based on a new appraisal, and what it costs. Only if the answer is no, or if rates have dropped enough to justify it, get refinance quotes and run the break-even math.
To see all your options side by side, get a free payoff projection from a licensed agent.
Example assumes a $400,000 home and a $360,000 30-year fixed mortgage at 6.5% with $150 a month in PMI, figures rounded. Closing costs vary by lender and state. Current-value cancellation rules described are common Fannie Mae and Freddie Mac guidelines.
