Mortgage Insurance vs Homeowners Insurance: What You Can Cancel and What You Cannot

Mortgage insurance and homeowners insurance are two different policies on the same house: PMI protects your lender against your default and can be cancelled, while homeowners insurance protects the property itself and is required for the life of the loan. On a $210,000 conventional loan, PMI runs roughly $52 to $263 a month, and federal rules give you the right to request cancellation once your scheduled balance reaches 80% of the home’s original value. If removing PMI still leaves your payment underwater, Skip The Agent writes cash offers within 24 hours, closes in as few as 7 days, and charges you zero fees or commissions.

You opened your mortgage statement and saw two insurance-looking lines. One is labeled PMI or MIP. The other is a chunk of your escrow going to a homeowners insurance carrier. You have been paying both for years, your carrier just raised the premium, and nobody at your servicer has explained which one you can actually get rid of.

This article is for you if you are a homeowner with a mortgage who is trying to cut the monthly payment, or you got a non-renewal notice from your hazard insurer and you are trying to figure out whether that ends your loan, or you are considering a sale and want to know which of these two premiums transfers to the buyer. Short answer up front on that last point: neither transfers, and only one of them is your problem to solve before closing.

The two insurances are protecting two different people

Private mortgage insurance, or PMI, is a policy your lender bought using your money. It pays the lender if you default and the foreclosure sale does not cover the loan balance. It does nothing for you. It exists because you put less than 20% down, and the lender wanted a backstop on the risk that came with that.

Homeowners insurance, sometimes called hazard insurance, is a policy on the physical house. It pays out when a tree crushes the roof, when a pipe bursts in February, when a kitchen fire scorches the drywall. Your lender requires you to carry it because the house is their collateral, but the coverage protects the property, and any claim check goes toward repairing what got damaged.

The two share a mortgage statement and nothing else. Different insurers. Different beneficiaries. Different rules on when they end.

If your statement says “hazard insurance,” that is the homeowners policy, not a third thing. Your servicer collects roughly one twelfth of the annual premium with each payment, holds it in escrow, and pays your carrier directly when the policy renews. That is why a premium increase raises your payment without anyone rewriting your loan, and why the hazard line keeps moving while the PMI line sits still until it terminates.

Mortgage insurance protects the lender against borrower default and can be cancelled once you reach 20% equity in the original purchase price. Homeowners insurance protects the physical property against damage and is required by your lender for the entire life of the loan. They are two separate policies with two separate beneficiaries.

When does PMI go away: the three federal triggers

The Homeowners Protection Act gives you three ways PMI ends on a conventional loan. All three run off the original value of the home, not today’s value, and the Consumer Financial Protection Bureau publishes these rules directly.

Trigger 1: Borrower-requested cancellation at 80% LTV. You have the right to ask your servicer in writing to cancel PMI on the date the principal balance is scheduled to fall to 80% of the original value of the home. “Scheduled” is the key word. This runs off your amortization schedule, not off appreciation and not off extra principal payments you made along the way. You must be current on payments, have a good payment history, certify there are no junior liens on the property, and provide evidence the current value has not fallen below the original value. The servicer can require an appraisal or broker price opinion at your expense to confirm that last point.

Trigger 2: Automatic termination at 78% LTV. Your servicer must automatically terminate PMI on the date your principal balance is scheduled to reach 78% of the original value. You do not have to ask. You do have to be current on payments. If you are behind at the trigger date, termination happens shortly after you catch up.

Trigger 3: Midpoint termination. If neither of the above has happened, PMI must end the month after the midpoint of your amortization schedule. On a 30-year loan, that is year 15. On a 15-year loan, that is year 7.5. This trigger also requires you to be current.

The trap most homeowners miss: triggers 1 and 2 run off original value. If your house has appreciated 30% since you bought it, your actual loan-to-value ratio might already be 65%, but the servicer will not cancel automatically until the scheduled balance hits 78% of what you paid. To use today’s higher value, you have to go through a separate borrower-initiated request with a lender-ordered appraisal.

PMI removal appraisal: how the current-value route works

This is where the “pmi removal appraisal” question gets interesting. Fannie Mae and Freddie Mac allow servicers to cancel PMI based on current value, but the rules are stricter than the original-value path.

Under Fannie Mae’s servicing guide, you generally must have had the loan for at least two years, and the current LTV must be at or below 75% if the loan is two to five years old, or 80% if the loan is over five years old. Freddie Mac’s rules are similar. Some servicers apply a substantial-improvement exception with shorter seasoning if you made documented capital improvements that increased the value. The appraisal or BPO comes out of your pocket, typically $450 to $650. Verify the exact current thresholds with your servicer before you order anything, because these numbers do move.

How to get rid of PMI: the step-by-step

Pull your original closing documents. Find the original purchase price and the original loan amount. Multiply the original purchase price by 0.80. That is the balance you need to hit for a borrower-initiated cancellation using original value. Multiply by 0.78 for automatic termination.

Now check your current principal balance on your mortgage statement. If you are already below the 80% figure, you can send a written cancellation request to your servicer today. The request needs to include your loan number, a statement that you are requesting PMI cancellation, and your certification that you have no junior liens and payments are current. Send it certified mail or through your servicer’s secure message portal so you have a timestamp.

If you are not below 80% of original value but you believe today’s market value would put you there, you are asking for a value-based cancellation. Call your servicer, ask for their exact current-value cancellation requirements in writing, and ask which appraisal management company they will accept. Order the appraisal through their process, not your own, or the report will not be accepted.

If your loan changed hands, your cancellation rights followed it. Servicing transfers do not reset the clock. The new servicer inherits the same trigger dates and the same federal rules, so if your old servicer would have cancelled next month, the new one owes you that cancellation on the same date. Send the written request to whoever is taking your payment now, and keep the original closing documents that establish the original value, because a new servicer sometimes cannot produce them.

How to get rid of PMI FHA: this one is different

FHA loans do not carry PMI. They carry MIP, the Mortgage Insurance Premium, which is a separate program with its own rules. Two premiums, actually: an upfront premium rolled into your loan balance at closing, and an annual premium paid monthly with your mortgage payment.

The rules for when MIP ends depend on your loan-to-value at origination. If your original LTV was 90% or less, meaning you put at least 10% down, MIP ends after 11 years. If your original LTV was above 90%, MIP stays for the life of the loan. That is not a typo. On most FHA loans originated after June 2013 with less than 10% down, the only way to stop paying MIP is to refinance out of the FHA program into a conventional loan.

That refinance is the exit. Once you have 20% equity based on current appraised value, a conventional refinance replaces the FHA loan and drops the MIP entirely, replacing it with either no mortgage insurance or a much lower PMI that follows the cancellation rules above. Run the numbers before you refinance: closing costs typically eat 2% to 4% of the loan, and current rates matter. If your FHA rate is well below today’s rates, the MIP savings may not cover the higher interest cost. Verify your specific loan’s rules against the current HUD Handbook 4000.1 or the most recent HUD mortgagee letter before you make any move.

There is no such thing as an FHA loan without mortgage insurance, which is the part people keep hoping is wrong. If you want no monthly mortgage insurance at all, the path is a VA loan if you qualify, which carries a one-time funding fee and no monthly premium, or a conventional loan with 20% down.

What removing PMI actually saves you

PMI on a conventional loan typically costs 0.3% to 1.5% of the original loan amount per year, depending on your credit score and down payment. On a $210,000 loan, that is roughly $52 to $263 per month. Median-scenario borrowers pay around $100 to $150.

Here is the number that matters. If you cancel PMI, your monthly payment drops by exactly the PMI line, and nothing else. Your escrow still holds property taxes. Your escrow still holds the hazard premium, which is the line moving fastest: the national average homeowners policy runs about $2,490 a year, roughly $208 a month, according to NerdWallet’s 2026 analysis. Where you own changes that number more than anything you do to the house. Insurify puts the Indiana increase above 17% over the prior period with another 3% projected in 2026, and coastal and wildfire states have seen multiples of that.

Removing PMI is the cleanest lever on your payment because you can execute it on your own timeline. It will not fix a payment that is unaffordable because the loan itself was too big, or because your escrow keeps ballooning from tax reassessments and insurance renewals. If PMI cancellation shaves $120 off your payment and you still cannot make it work, the problem is not PMI. It is the loan.

That is the point at which you look at the real options instead of shaving line items. What Does It Cost to Sell a House in 2026? breaks down the full traditional sale math, and if the payment pressure is coming from a rising insurance line rather than the loan structure, Why Insurance Rates Are Spiking on Older Midwestern Homes explains why the premium is climbing and what you can and cannot do about it.

Which insurance actually kills a home sale

PMI does not kill sales. It is not a closing cost. It does not transfer. It stops existing the moment the buyer’s funds pay off your mortgage at closing. A buyer cannot assume it, because a buyer with less than 20% down will need their own new PMI policy priced off their own credit and down payment.

Hazard insurance kills sales. Lenders require the homeowners policy to be bound and in force at closing. If your carrier dropped you and no standard-market carrier will write a new policy because of the roof, the age of the electrical, a prior claim history, or the property being vacant, your buyer’s lender will not fund the loan. The closing falls apart, sometimes the day of. If you are the seller sitting on a non-renewal notice right now, that is the fire to put out, not PMI. Your Insurer Dropped You. Can You Still Sell the House? walks through what to do next, including the buyer pools that can still close on a home other buyers cannot insure.

Cash buyers, including Skip The Agent, do not require a hazard policy at closing because there is no lender to satisfy. That is the entire mechanical reason cash sales can move on uninsurable homes. If your sale is stalled because of an insurance problem, request a free estimate and we will show you the math on what our offer looks like next to what a traditional listing would net after commissions, concessions, and the repairs the insurance carrier flagged.

When keeping the house is still the right call

If you are current on payments, your loan is otherwise affordable, and your PMI is within a year or two of scheduled cancellation, the answer is to wait it out or send the written request the moment you hit the trigger. Do not sell a house you can afford to keep because of a $110 PMI line that ends on its own.

If you have significant equity, a stable income, and a house that is insurable and in reasonable condition, list with an agent. A traditional listing will typically net more than a cash offer on that profile of home, even after the 5% to 6% commission and typical repair concessions. Cash offers make sense when the traditional listing math breaks down: when the house needs repairs you cannot fund, when the carrying costs are eating equity every month, when you cannot occupy the house long enough for a 45 to 60 day escrow, or when the insurance problem prevents a financed buyer from closing.

We tell sellers this directly because a cash offer that gets rejected is a cash offer that never made us money. The offers that get accepted are the ones grounded in real market math for sellers who actually need the speed or the as-is close.

Frequently Asked Questions

When does PMI go away automatically? PMI ends automatically on the date your scheduled principal balance reaches 78% of the original home value, provided you are current on payments. If you are behind at that date, termination happens shortly after you catch up. There is also a mandatory midpoint termination at year 15 of a 30-year loan.

When can I get rid of PMI by asking for it? You can request PMI cancellation in writing once your scheduled principal balance is at or below 80% of the original home value. The request requires a good payment history, current payments, certification that there are no junior liens, and evidence the current value has not fallen below the original value. The servicer may require a lender-ordered appraisal at your expense.

Is mortgage insurance the same as homeowners insurance? No, they are two separate policies with two separate purposes. Mortgage insurance protects your lender against your default and can be cancelled once you hit 20% equity based on original value. Homeowners insurance protects the physical property against damage and is required by your lender for the entire life of the loan.

How do I get rid of PMI on an FHA loan? If your original loan-to-value was 90% or less, FHA MIP ends automatically after 11 years. If your original LTV was above 90%, MIP stays for the life of the loan, and the only exit is refinancing into a conventional mortgage once you have 20% equity based on current appraised value. Verify the specific rules for your loan against HUD Handbook 4000.1 before you refinance.

Does a PMI removal appraisal have to come from my lender? Yes, the appraisal must be ordered through your servicer’s approved appraisal management process, not one you arrange yourself. Servicers will reject reports that do not come through their assigned appraiser or AMC. You pay the cost, typically $450 to $650, but the order goes through them.

My loan was sold to a new servicer. Does that restart my PMI clock? No. Your PMI history and your cancellation dates travel with the loan, and the new servicer has to honor the same triggers the old one would have. Keep your original closing documents, because the 80% and 78% thresholds are calculated off the original value and a new servicer sometimes cannot produce that paperwork.

Can I cancel homeowners insurance if I still have a mortgage? No, your lender requires homeowners insurance for the life of the loan, and cancelling it triggers force-placed coverage that costs two to five times more. If your premium became unaffordable, shop the policy with independent carriers before you drop coverage. If no standard carrier will write the risk, that is a separate problem worth addressing before your next renewal.

Does PMI transfer to the buyer when I sell? No, PMI does not transfer. Your PMI policy exists only as long as your loan exists, so it terminates automatically when the buyer’s funds pay off your mortgage at closing. A buyer putting less than 20% down will need their own new PMI policy priced on their credit profile and down payment.

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Written by Addai Lewellen and Grant Umali, co-founders of Skip The Agent LLC. Addai is a lifelong Indiana resident with deep experience in the Indianapolis and Midwest real estate market. Grant brings a background in marketing, sales, and customer success. They handle every deal personally. Reach them directly at skiptheagent.llc.