0–3 yr · What is still being charged
The year your mortgage insurance stops
Two loans with the same rate are not the same loan. The largest hidden difference between them is a date, and it is a date you can calculate before you sign.
Two loans, the same rate, the same term, the same house. On the day you sign, the payments are within a few dollars of one another. Ten years in, one of them still carries a mortgage insurance line on the statement and the other does not. Nothing about the rate explains that. The thing that explains it is a date, and almost nobody is shown the date.
Mortgage insurance is not a fee you pay. It is a fee you pay until something happens. Which something, and when, is written into a different set of rules for each programme, and those rules are the largest structural difference between two loans that look identical on a rate sheet.
The conventional rule is federal law, and it has two numbers
Private mortgage insurance on a conventional loan is governed by the Homeowners Protection Act. For a borrower-paid policy on a single-family primary residence it gives you two separate rights, and they are emphatically not the same right.
- At 80% of the original value, you may request cancellation in writing. The servicer is under no obligation to act on a request you never make, and a great deal of money is left on the table exactly here.
- At 78% of the original value, the servicer must terminate the policy automatically, with no request from you, provided you are current on your payments.
- If neither has happened by the midpoint of the amortisation period, which is year fifteen of a thirty-year loan, the policy must end anyway, again provided you are current.
That last point is the one that catches people out. A market that has been kind to you does not move the automatic termination date by a single month, because the automatic rule does not look at the market at all. Appreciation is handled somewhere else entirely. Fannie Mae and Freddie Mac each have their own cancellation policies that allow a servicer to drop mortgage insurance on the strength of a new appraisal once the current value supports it, usually with a seasoning requirement and a payment-history condition attached. That is an investor policy you have to go and ask for. It is not a statutory right that arrives on its own.
The FHA rule is a different shape, and it does not end
FHA charges its insurance twice. There is an upfront mortgage insurance premium of 1.75% of the base loan amount, which is almost always financed into the loan, so you pay interest on it for as long as you keep the loan. Then there is the annual premium, collected monthly, and the annual premium is where the structural difference lives.
- On a thirty-year loan with less than 10% down, the annual premium is charged for the life of the loan.
- With 10% or more down, it ends after eleven years.
- Reaching 20% equity does nothing at all. Neither does reaching fifty. There is no equity threshold to cross, because the rule is not written against equity.
So on the common version of FHA, the exit is not a date. The exit is a refinance into a conventional loan, which means the exit depends on a rate you cannot see and a credit profile you do not yet have. That is a real cost, and it appears nowhere on a payment comparison.
The other three programmes, briefly
USDA Guaranteed charges an annual fee, currently 0.35% of the average scheduled balance, collected monthly for the life of the loan, with exactly the same consequence as FHA: the exit is a refinance. VA charges no monthly mortgage insurance of any kind, which is a structural advantage that never shows up in a rate comparison. And a conventional loan at 20% down has no mortgage insurance to terminate, which is the whole reason twenty is the number everybody repeats.
| Programme | What ends the monthly insurance | Roughly when |
|---|---|---|
| Conventional, borrower-paid | A statutory threshold on the original schedule, or a new appraisal under investor policy | A date you can calculate before you sign |
| Conventional, lender-paid | Nothing. The premium is inside the rate | Only a refinance |
| FHA, less than 10% down | Nothing | Only a refinance out of FHA |
| FHA, 10% or more down | The eleven-year mark | Year eleven |
| USDA Guaranteed | Nothing | Only a refinance |
| VA | There is none to end | Day one |
Lender-paid mortgage insurance is the quiet one
Lender-paid mortgage insurance is sold as the loan with no mortgage insurance, and technically that is true: there is no separate line on the statement. The premium is inside the rate instead. It buys a lower payment than borrower-paid cover in the early years, and it never terminates, because there is nothing there to terminate. On a loan you keep for four years it can win comfortably. On a loan you keep for twelve it usually loses. It is the same bet as buying points, wearing a different coat.
What to ask before you sign
- The scheduled month of automatic termination, taken from the original amortisation schedule, in writing.
- The earliest month at which you could request cancellation, and what the servicer will require of you: a written request, a payment history, and sometimes an appraisal at your own expense.
- Whether the policy is borrower-paid or lender-paid. If nobody will say the words out loud, assume it is lender-paid and ask again.
- On FHA, whether the down payment can reach 10%, because that single change turns a permanent premium into an eleven-year one.
None of this needs an underwriter or a credit pull. It is arithmetic on a schedule that exists before the loan does. Ask for the date, write it on the front of the file, and compare the two loans across the years you actually expect to keep them rather than across the first month.
A rate is a number you can compare in ten seconds. A termination date is a number you have to ask for, and it is worth more.
This is a design demonstration and an explanation of published rules, not advice about your file. Nothing here is an offer or a commitment to lend. See thedisclosures.