Private Mortgage Insurance, or PMI, is something many homeowners encounter when they purchase a home with less than 20% down. While PMI makes homeownership more accessible by allowing buyers to purchase sooner with a smaller down payment, it’s often viewed as an extra monthly expense that most people want to remove as soon as possible. One of the most common ways to eliminate PMI is through refinancing.
When you refinance, you’re essentially replacing your current mortgage with a new one. If your home has gained value since you purchased it, or you’ve paid down enough of your loan balance, you may now have 20% or more equity. That’s the magic number most lenders look for when considering whether PMI can be removed. A refinance allows you to lock in a new loan without PMI, potentially lowering your monthly payment and saving you money over the long term.
Timing is important. If interest rates are lower than when you purchased your home, refinancing could provide a double benefit—removing PMI and reducing your rate. Even if rates are the same or slightly higher, the savings from eliminating PMI may still make a refinance worthwhile. It’s a matter of comparing the costs of refinancing, such as closing costs, with the potential savings over time.
It’s also worth noting that not every loan type has the same rules. For example, FHA* loans carry mortgage insurance for either a set period or for the life of the loan, depending on your down payment at purchase. In many cases, refinancing out of an FHA loan into a conventional loan with sufficient equity is the best way to drop that ongoing mortgage insurance.
If you’re wondering whether a refinance makes sense for you, the best step is to sit down with a licensed mortgage professional. We can help you look at your current loan, the value of your home, and your financial goals to see whether refinancing to remove PMI would provide the benefits you’re looking for.
If you’d like to explore your options, reach out today and let’s take a look at what refinancing could mean for your monthly payment and long-term savings.
*This is an FHA program. Please call your local HUD office to verify or visit their website at https://www.hud.gov/program_offices/housing.
