Can You Drop PMI Based on Your Home’s Current Value?

This article covers conventional loans owned or securitized by Fannie Mae. It does not cover FHA mortgage insurance, Freddie Mac loans or mortgage insurance your lender pays; ask your servicer which rules apply to yours.

What Fannie Mae changed in September 2026

On September 16, 2026, Fannie Mae issued Lender Letter LL-2026-07, “Updates to Mortgage Insurance Termination Requirements.” The letter says the change was made at the direction of the Federal Housing Finance Agency (FHFA), and that Fannie Mae is “permitting servicers to proactively solicit borrowers whose mortgage loans may be close to or have reached the loan-to-value (LTV) requirements for mortgage insurance (MI) termination based on current value of the property.”

Before the letter, Fannie Mae’s Servicing Guide said the opposite: “The servicer must not solicit a borrower for MI termination based on current value of the property.” A homeowner had to ask first. The letter states, “This policy change is effective immediately,” and that it “will be reflected in a future Servicing Guide update.” As of October 7, 2026, the printed Guide still carried the old sentence, so the letter is the text that controls.

The letter permits outreach. It does not require any servicer, the company that collects your mortgage payments, to contact you, and it does not change the rules a request has to meet. Those rules are below.

Three ways PMI can end on a Fannie Mae loan

PMI can end automatically under federal law, or when you ask, based on the original value or, on a loan Fannie Mae owns or securitizes, the current value.

1. Automatically, by law. The federal Homeowners Protection Act sets a “termination date”: the date your balance is first scheduled to reach 78 percent of the original value, based on the loan’s amortization schedule. The Consumer Financial Protection Bureau (CFPB) explains that your servicer “must automatically terminate PMI” on that date if you are current. There is also a final backstop: “Your lender or servicer must end the PMI the month after you reach the midpoint of your loan’s amortization schedule.” That backstop also requires you to be current on your payments.

2. You ask, based on original value. You can ask to cancel PMI when the balance is scheduled to reach 80% of the original value. The CFPB lists the conditions: “You make your request in writing,” you have “a good payment history and are current on your payments,” and you “certify that there are no junior liens,” such as a second mortgage or home equity line of credit, and the home’s value has not declined. “Original value” is “the lesser of the sales price of the property securing the mortgage, as reflected in the contract, or the appraised value” when the loan was made. If you refinanced, “the ‘original value’ is the appraised value at the time you refinanced.” The federal rules in paths 1 and 2 cover “mortgages for single-family principal residences that closed on or after July 29, 1999.”

3. You ask, based on current value. This is Fannie Mae’s own servicing policy for the loans it owns or securitizes, and it is the path LL-2026-07 touches. The request can be “written or verbal.” A written request gives you a record of the date you asked.

Current-value limits by loan age

The loan-to-value ratio (LTV) is a measure comparing the amount you are financing with the appraised value of the property. On this path, the value is a new one, and the limit depends on how long you have had the loan, which the Guide calls seasoning.

For a one-unit home that is not an investment property, Fannie Mae’s Servicing Guide topic B-8.1-04 says “the LTV ratio must be 75% or less, if the seasoning of the mortgage loan is between two and five years,” and “80% or less, if the seasoning of the mortgage loan is greater than five years.”

Two- to four-unit homes you live in, and investment properties of one to four units, are not in those tiers. For them, “the LTV ratio must be 70% or less and the seasoning of the mortgage loan must be greater than two years.”

If your loan is less than two years old, the 75% and 80% tiers are not open yet; on a one-unit home that is not an investment property, only the improvement path below can apply. Ask your servicer which date it counts the loan’s age from before you apply.

Payment history and valuation requirements

The payment record. The Guide’s test is stricter than being current today. The payment for the month before your request must be paid, and the servicer looks back over the last 12 months and the last 24 months for late payments. A late payment inside either window can stop the request, so check your own record first.

The valuation. The new value comes from “a property valuation based on an inspection of both the interior and exterior of the property,” ordered through Fannie Mae’s servicing system. For a one-unit home, the servicer orders an interior and exterior broker price opinion (BPO), a value estimate prepared by a real estate broker, “or appraisal if the servicer determines it is required by law.” For two to four units, it is an appraisal.

Who pays. You do, before the valuation is ordered. Fannie Mae’s Servicing Guide topic F-1-02 says: “The BPO or appraisal to determine the current value of the property is at the expense of the borrower and the servicer must only order the valuation after the servicer receives the applicable fee.” Ask your servicer what the fee will be. If the value comes in too low to meet the limit, the request does not end PMI.

Remodels and additions: the substantial improvement path

On the one-unit tiers above, the two-year wait has one exception. B-8.1-04: “If Fannie Mae’s minimum two-year seasoning requirement is waived because the property improvements made by the borrower increased the property value, the LTV ratio must be 80% or less.” Fannie Mae’s servicer FAQ adds that this improvement path “may be selected for a loan of any age.”

The Guide describes what counts by example: “renovations that substantially improve marketability and extend the useful life of the property (e.g. kitchen and bathroom renovations and/or the addition of square footage).” What does not count: “Repairs that are made to keep the property maintained and fully functional are not considered improvements.”

You supply the details. “The borrower must provide details to the servicer on the property improvements made since the mortgage loan’s origination.” Your servicer evaluates the details you provide. The FAQ also sets a reasonableness test: the amount spent “should be commensurate with the additional dollar amount required to reduce the UPB to meet the required LTV ratio.” UPB is the unpaid principal balance, what you still owe. In plain terms, the money spent should be in line with the value increase you are counting on.

How this differs from FHA mortgage insurance

The current-value path is a Fannie Mae policy for conventional private mortgage insurance. It does not end FHA mortgage insurance. FHA loans, insured by the Federal Housing Administration, carry an annual mortgage insurance premium (MIP) under the rules of the Department of Housing and Urban Development (HUD), and a new appraisal does not shorten it.

For FHA case numbers assigned on or after June 3, 2013, HUD Mortgagee Letter 2013-04 sets how long the annual MIP runs by the loan-to-value at the start. Above 90%, “FHA will assess the annual MIP until the end of the mortgage term or for the first 30 years of the term, whichever occurs first.” At 90% or less, “the annual MIP will be assessed until the end of the mortgage term or for the first 11 years of the mortgage term, whichever occurs first.” Moving from FHA to a conventional loan is a refinance, a separate decision with its own costs.

How to start a PMI removal request with your servicer

1. Confirm who owns the loan. Ask your servicer whether Fannie Mae owns or securitizes it. The current-value path depends on that answer.
2. Check your payment record against the 12-month and 24-month look-backs before you spend anything.
3. Ask the servicer four questions: which valuation it will order, what the fee is, which date it counts the loan’s age from, and whether a second mortgage or home equity line of credit on the home affects the request.
4. Compare your balance with a realistic value before you pay. The fee is paid first, and a value that falls short does not end PMI.
5. Make the request in writing or by phone, and keep a note of the date.

When a refinance conversation makes sense instead

Some homeowners fall outside this path: an FHA loan, a loan Fannie Mae does not own or securitize, a value that falls short, or a recent late payment. If Fannie Mae is not behind your loan, ask your servicer what your loan’s owner allows before you think about a refinance. A refinance replaces your loan with a new one, with a new rate on the whole balance, new terms and new costs, and afterward the “original value” for the federal PMI rules is the refinance appraisal. Whether that trade makes sense depends on credit, income, equity, property type and lender guidelines, and for some homeowners the right answer is to keep paying PMI until one of the paths above opens, or, on an FHA loan, to keep paying the annual MIP.

Sources

• Fannie Mae, Lender Letter LL-2026-07, Updates to Mortgage Insurance Termination Requirements (Sept. 16, 2026) (accessed 2026-10-07)
• Fannie Mae, Servicing Guide B-8.1-04, Termination of Conventional Mortgage Insurance (05/15/2019) (accessed 2026-10-07)
• Fannie Mae, Servicing Guide F-1-02, Escrow, Taxes, Assessments, and Insurance (05/13/2026) (accessed 2026-10-07)
• Fannie Mae, Borrower-Initiated MI Termination Requests Using SMDU FAQs (April 17, 2025) (accessed 2026-10-07)
• U.S. Government Publishing Office, 12 U.S.C. 4901, Definitions (Homeowners Protection Act), United States Code, 2023 Edition (accessed 2026-10-07)
• Consumer Financial Protection Bureau, When can I remove private mortgage insurance (PMI) from my loan? (accessed 2026-10-07)
• U.S. Department of Housing and Urban Development, Mortgagee Letter 2013-04 (Jan. 31, 2013) (accessed 2026-10-07)