How do I get rid of PMI?
On a conventional loan you can request that private mortgage insurance be cancelled once your balance reaches 80% of the original property value, and it must terminate automatically at 78% provided your payments are current. FHA mortgage insurance is different — on most current FHA loans it lasts the life of the loan, and refinancing to conventional is the usual way out.
Conventional: two routes off
The first is your right to request cancellation once the loan balance reaches 80% of the original value, with a good payment history. The second is automatic termination at 78%, which the lender must apply without you asking.
There is also a third route people miss: if your home has appreciated, you can request cancellation based on the current value rather than the original one, usually supported by an appraisal you pay for. In a market that has risen since you bought, that can bring the date forward by years.
FHA: why the rules differ
On most FHA loans written under current rules, the annual mortgage insurance premium continues for the life of the loan regardless of how much equity you build. Paying the balance down does not remove it.
The standard exit is refinancing into a conventional loan once you have enough equity and a credit profile that prices well. For Triangle homeowners who bought with FHA a few years ago and have seen values rise, this alone is frequently worth more than any rate improvement in the same refinance.
Working out whether it is worth doing now
Removing FHA mortgage insurance means a refinance, which means closing costs. The same break-even logic applies: what you save each month against what it costs to get there, measured against how long you plan to stay.
What makes this case unusual is that you are often capturing two savings at once — the mortgage insurance and any rate improvement — which can make the break-even much shorter than a rate-only refinance would be.
Sources
We would rather you checked than took our word for it.
Related
Interest rate vs APR: what is the difference?
The interest rate determines your monthly principal-and-interest payment.
How much house can I afford?
Lenders decide what you can borrow using your debt-to-income ratio: your total monthly debt payments, including the new mortgage, divided by your gross monthly income.