Refinancing your home loan in 2025 could help you get a lower interest rate, reduce your monthly payments, or access your home’s equity. But many homeowners wonder:
“Will I need to pay mortgage insurance again when I refinance?”
The short answer: It depends.
In this article, we’ll explore whether mortgage insurance is required when refinancing, how it works with different loan types (conventional, FHA), and how you can avoid or eliminate it during the refinance process.
🧾 What Is Mortgage Insurance, and When Is It Required?
Mortgage insurance is designed to protect lenders, not borrowers, if you stop making payments on your loan.
There are two main types:
- PMI (Private Mortgage Insurance) — for conventional loans
- MIP (Mortgage Insurance Premium) — for FHA loans
You typically need mortgage insurance if your loan-to-value ratio (LTV) is above 80% — meaning you have less than 20% equity in your home.
🔁 What Is Refinancing?
Refinancing means replacing your current mortgage with a new loan, usually to:
- Get a better interest rate
- Change the loan term (e.g., 30 years to 15 years)
- Switch loan types (FHA to conventional)
- Access home equity (cash-out refinance)
But just like when you first bought your home, the rules for mortgage insurance still apply during refinancing.
❓ Do You Need Mortgage Insurance When Refinancing a Conventional Loan?
✅ If You Have 20% Equity or More: NO PMI Needed
When refinancing a conventional mortgage:
- If your new loan amount is 80% or less of your home’s appraised value, PMI is not required
- You’ll avoid the extra monthly insurance cost completely
Example:
Home value = $300,000
New loan = $240,000
LTV = 80% → No PMI required
❌ If You Have Less Than 20% Equity: PMI May Be Required
If your LTV is above 80%, lenders usually require PMI on the new loan.
But here’s the good news:
- PMI rates are often cheaper when refinancing (especially if your credit score improved)
- Some lenders offer lender-paid PMI in exchange for a slightly higher interest rate
- You can remove PMI later once you reach 20% equity
🟩 FHA Refinance: What About FHA Mortgage Insurance (MIP)?
🔁 FHA-to-FHA Refinance
If you refinance your existing FHA loan into another FHA loan, you’ll still need to pay:
- Upfront MIP (UFMIP): 1.75% of loan amount
- Annual MIP: 0.55%–1.05%, depending on loan terms
In most cases, you can’t remove FHA MIP, unless:
- You made a 10%+ down payment originally, and
- You’ve had the loan for 11 years
Otherwise, MIP stays for the life of the loan.
🔁 FHA-to-Conventional Refinance
This is where you can finally say goodbye to MIP.
If your credit has improved and you have at least 20% equity, refinancing from FHA to a conventional loan means:
- No MIP
- Possibly no PMI (if 80% LTV or lower)
✅ This is the most common strategy homeowners use to eliminate FHA mortgage insurance.
🔄 Cash-Out Refinance and Mortgage Insurance
In a cash-out refinance, you replace your old mortgage with a new, larger one — and take the difference in cash.
But there’s a catch:
- If your new loan exceeds 80% of your home’s value, mortgage insurance will be required
- Even if your original loan had no PMI, your cash-out refinance might include it
Example:
- Home value: $350,000
- Current loan: $220,000
- Cash-out refinance loan: $300,000
- LTV = 86% → PMI required
🧠 Tip: Try to keep your new loan below 80% of the appraised value if you want to avoid PMI.
💰 How Much Does Mortgage Insurance Cost in a Refinance?
| Type of Insurance | Typical Annual Cost (%) | Notes |
| PMI (Conventional) | 0.2% to 2.0% of loan | Based on credit score, LTV |
| FHA MIP | 0.55% to 1.05% + 1.75% upfront | Mandatory unless you switch to conventional |
The better your credit score and the more equity you have, the less you’ll pay.
📊 How to Avoid Mortgage Insurance When Refinancing
- Build 20% Equity
Make extra payments or wait for your home’s value to rise. - Get a New Appraisal
A fresh appraisal could show that your LTV is lower than you thought. - Choose the Right Loan Type
Refinance into a conventional loan if you’re currently in an FHA loan. - Improve Your Credit Score
Better credit = lower PMI rates or better approval chances with no PMI. - Shop Multiple Lenders
Some lenders offer better mortgage insurance terms than others.
🧠 Real-Life Example
Zainab bought her home in 2021 with an FHA loan of $250,000 and 3.5% down.
In 2025:
- Her home is now worth $320,000
- Her loan balance is $215,000 → LTV = 67%
- She refinances into a conventional loan
🎯 Result:
- Eliminates FHA MIP
- Gets a lower rate
- No PMI due to 20%+ equity
- Saves $180/month
📁 Documents You’ll Need for a Refinance
- Current mortgage statement
- Income verification (pay stubs, W-2s)
- Credit check
- Property appraisal (usually required)
- Homeowners insurance proof
These help your lender calculate whether mortgage insurance is needed.
✅ Key Takeaways
- PMI is only required during refinance if your equity is below 20%
- FHA MIP usually continues, unless you switch to a conventional loan
- Refinancing can eliminate mortgage insurance and save you thousands
- Always compare costs and options before refinancing
- Cash-out refinances may include PMI if equity drops below 20%
🏁 Conclusion
Mortgage insurance during refinancing in 2025 depends mostly on your equity and loan type. If your home has appreciated in value and you’ve paid down your loan, there’s a good chance you can refinance without any mortgage insurance at all.
And if you’re stuck with FHA MIP? Consider refinancing into a conventional loan with 20% equity and say goodbye to monthly insurance fees.
✅ The more equity you build, the more control you have over your loan — and your wallet.