Do You Get PMI Back? Refund Rules by Payment Type

Whether you get PMI back depends on how you paid for it. A single upfront premium on a conventional loan produces a refund of the unearned portion when coverage ends early. Monthly premiums generally do not, unless your servicer kept charging you after PMI should have stopped. Lender-paid coverage never refunds anything because you never paid a separate premium in the first place. FHA upfront mortgage insurance follows its own schedule, with a partial credit that shrinks month by month and disappears after 36 months.

Refunds Depend on How You Paid

Single Upfront Premium (Conventional Loans)

If you paid your private mortgage insurance as one lump sum at closing, federal law is on your side. Under the Homeowners Protection Act, your servicer must return all unearned premiums within 45 days after PMI is canceled or terminated.¹ “Unearned” means the portion of your upfront payment that covered months of coverage you will no longer use, because you refinanced, sold the home, or paid the loan down to the cancellation threshold.

The mechanics run through the insurer. The insurer must transfer any unearned premiums it holds to your servicer within 30 days of being notified that your PMI has ended, and Fannie Mae’s servicing guidelines direct the servicer to forward that money to you as soon as it is received, no later than 45 days after the termination date.² The refund amount is calculated from the remaining months of coverage at the moment your policy ended.

Monthly Premiums

Each monthly PMI payment buys one month of coverage. Once that month begins, that payment is spent. So in the normal case, when your PMI cancels or terminates on schedule, there is nothing to refund — the last premium you paid covered the last month you needed it.

The exception is important. Federal law prohibits your servicer from collecting PMI premiums more than 30 days after coverage was supposed to end, whether that ending came from your cancellation request at 80 percent, automatic termination at 78 percent, or final termination at the loan’s midpoint.¹ Anything charged past that deadline is refundable, typically as a credit to your escrow account or a direct payment to you.

Lender-Paid Mortgage Insurance

Lender-paid coverage is not refundable and cannot be canceled. You never made a separate insurance payment; the lender paid the insurer upfront and recouped the cost by charging you a higher interest rate for the life of the loan. Because the cost is baked into your rate rather than billed as a premium, there is no separate amount to give back. The higher rate stays in place even if your equity grows past 80 percent. Refinancing into a new loan is the only way to eliminate the added cost, and that replaces the loan rather than refunding anything.

FHA Upfront Premium: A Partial Credit, Not Cash

FHA loans carry a different kind of mortgage insurance with its own refund rules. The upfront mortgage insurance premium on most FHA loans is 1.75 percent of the base loan amount.³ If you refinance from one FHA loan into another FHA loan within 36 months, you can receive a partial credit of that upfront premium. The credit is not paid to you in cash. It is applied toward the upfront premium on the new FHA loan.⁴

The credit shrinks by roughly two percentage points each month after closing. At one month, the refund is about 80 percent of the original upfront premium. By month 12, it drops to about 58 percent. At month 24, it falls to roughly 34 percent. At month 36, only about 10 percent remains. After 36 months, no refund is available. To qualify, the original FHA loan must be current with no serious delinquencies, and the loan cannot be in foreclosure or an assumed mortgage.

HUD also issues automatic refunds in a few situations that do not involve refinancing: overpayment of the upfront premium, submission of the premium under an invalid case number, or cancellation of a case before endorsement. Overpayment refunds are sent about four weeks after endorsement; canceled-case refunds take six to eight weeks.⁴ Requested refunds go through HUD’s Single Family Insurance Operations Division and can take up to 60 days to process.

When PMI Ends and the Refund Clock Starts

A refund of an unearned upfront premium, or a stop to monthly billing, is tied to the moment PMI actually ends. On a conventional loan, there are three ways that happens.

You can request cancellation once your principal balance reaches 80 percent of the home’s original value, either through scheduled payments or through extra principal you’ve paid down.⁵ “Original value” is generally the lower of the purchase price or the appraised value when you bought the home, or the appraised value at the time of a refinance.⁶ To grant the request, your servicer needs a written request, a good payment history, current status on the loan, and evidence that the property value has not dropped below the original value along with certification that no junior liens exist.⁷

Even if you never ask, your servicer must automatically terminate PMI on the date your balance is first scheduled to hit 78 percent of the original value under the initial amortization schedule.⁵ Extra payments you’ve made do not move that date up; it runs off the original schedule.

If neither of the above has ended PMI, it must end on the first day of the month after you reach the midpoint of your loan’s amortization period, as long as you are current.⁷ For a 30-year loan, that is year 15.

There is also a value-based path. Fannie Mae’s guidelines allow cancellation when the loan-to-value ratio based on the home’s current value is 75 percent or less for loans less than two years old, or 80 percent or less for loans in place at least two years, typically shown through a new appraisal or a broker price opinion.²

Whichever trigger applies, your servicer must stop charging PMI within 30 days of it, and return any unearned upfront premium within 45 days.¹

Money Back for Overcharges After PMI Should Have Ended

Check your statements. If you are paying monthly PMI and your balance has crossed 78 percent of the original value on the amortization schedule, or you passed the midpoint of the loan while current, PMI should have stopped on its own. Anything your servicer collected more than 30 days past that point is refundable.¹ This is the most common way monthly-premium borrowers end up owed money.

Escrow Refunds After PMI Cancels

If your PMI was paid through escrow, canceling the insurance lowers what the servicer needs to hold. Your monthly payment must drop to remove the PMI portion, and the next annual escrow analysis may show a surplus. Under federal escrow rules, if the surplus is $50 or more and you are current on the mortgage, the servicer must refund it within 30 days of the analysis.⁸ Surpluses under $50 may be refunded or applied to next year’s escrow at the servicer’s discretion. The annual escrow statement will show how it was handled.

If the Servicer Won’t Pay

Start with a complaint to the Consumer Financial Protection Bureau, which oversees mortgage servicers and can require a servicer to reimburse premiums collected after PMI should have ended.⁶ Filing is free and often resolves the dispute without a lawsuit.

If it doesn’t, the Homeowners Protection Act lets you sue. An individual borrower can recover actual damages with interest from the date the violation started, statutory damages of up to $2,000, and reasonable attorney fees and court costs. You have two years from the date you discovered the violation to file, so late discovery does not automatically shut you out.⁹

One Tax Note

If you deducted PMI premiums in a prior tax year and later receive a refund of those premiums, the refund may be taxable income in the year you receive it under the tax benefit rule, to the extent the original deduction reduced your tax. If you did not itemize or your income phased out the deduction, the refund is generally not taxable. A tax professional is worth the call if the refund is large.

1
Office of the Law Revision Counsel. 12 USC Chapter 49 – Homeowners Protection
2
Fannie Mae. B-8.1-04, Termination of Conventional Mortgage Insurance
3
U.S. Department of Housing and Urban Development. Appendix 1.0 – Mortgage Insurance Premiums
4
U.S. Department of Housing and Urban Development. Refunding a Payment
5
Office of the Law Revision Counsel. 12 USC 4901 – Definitions
6
Consumer Financial Protection Bureau. When Can I Remove Private Mortgage Insurance (PMI) From My Loan
7
Office of the Law Revision Counsel. 12 USC 4902 – Termination of Private Mortgage Insurance
8
Consumer Financial Protection Bureau. Regulation 1024.17 – Escrow Accounts
9
Office of the Law Revision Counsel. 12 USC 4907 – Civil Liability