How to Remove PMI from Your Mortgage

Private Mortgage Insurance (PMI) protects your lender — not you — yet you are the one paying for it. For many borrowers, PMI adds $100 to $300 or more to the monthly payment. Understanding exactly when and how to eliminate it can save thousands of dollars.

What Is PMI and Why Do You Pay It?

PMI is an insurance policy that compensates the lender if you default on your loan. Lenders require it when your down payment is less than 20% of the home's purchase price — meaning your loan-to-value (LTV) ratio exceeds 80% at closing. From the lender's perspective, a borrower with less equity in a home presents more financial risk.

PMI is not a permanent cost. Federal law (the Homeowners Protection Act of 1998) gives borrowers clear rights to have PMI cancelled once sufficient equity is established. The key is knowing which rule applies to your situation and taking the appropriate action.

PMI typically costs between 0.3% and 1.5% of the original loan amount per year. On a $350,000 loan at 0.6% PMI, that is $2,100 per year — or $175 per month — being paid for coverage that provides you zero direct benefit. Use our PMI calculator to see exactly what you are paying and when it is projected to end.

The Three Ways PMI Ends

1. Automatic Cancellation at 78% LTV

Under the Homeowners Protection Act, lenders are legally required to automatically cancel PMI when your loan balance reaches 78% of the original purchase price — that is, when you have reached 22% equity based on the original appraised value. This happens automatically; you do not need to request it.

The calculation is based on the original purchase price, not the current market value of the home, and it is calculated on the scheduled amortization — meaning it assumes you are making standard payments on time. If you make extra principal payments, your balance may drop below 78% faster than scheduled, but the servicer will still only cancel automatically at the scheduled date unless you take action (see below).

You must also be current on your payments and have a satisfactory payment history for automatic cancellation to occur.

2. Requesting Cancellation at 80% LTV

You have the right to request PMI cancellation in writing once your loan balance reaches 80% of the original purchase price. This is two years earlier than automatic cancellation, which means two additional years of premium payments saved if you are proactive.

To exercise this right, you must: be current on your mortgage payments, have a good payment history (typically no 30-day late payments in the past 12 months and no 60-day late payments in the past 24 months), and certify that there are no junior liens on the property. Your lender may also require that the home's value has not declined below the original appraised value — they may request a new appraisal at your expense to confirm this.

3. Final Termination at Midpoint

Even if your LTV never reaches 80% due to missed payments or a declined property value, the Homeowners Protection Act requires that PMI be terminated on the date your loan reaches the midpoint of its amortization schedule — for a 30-year loan, that is the 15-year mark — as long as you are current on your payments.

Accelerating PMI Removal: Strategies That Work

Make Extra Principal Payments

Every dollar of extra principal payment directly reduces your loan balance and accelerates the date you reach the 80% LTV threshold. Even modest extra payments can move up your PMI removal date by months or years. Apply extra payments specifically to principal — confirm with your servicer how to designate them — and track your running balance against the 80% target.

Request a New Appraisal After Home Value Appreciation

If home values in your area have risen significantly since you purchased, your current LTV based on the new market value may already be at or below 80% — even if your scheduled amortization has not gotten there yet. In this case, you can request a new appraisal and ask your servicer to recalculate your LTV using the current appraised value.

This option is not available under the automatic cancellation rules (which use original value), but many lenders will consider it for borrowers who proactively request it. You will typically need to pay for the appraisal ($400 to $600) and demonstrate a satisfactory payment history. The lender is not legally required to cancel PMI on this basis, but many will in practice.

Refinance into a New Loan

If your home has appreciated substantially and your current LTV is well below 80%, refinancing into a new conventional loan at the current appraised value can eliminate PMI immediately. The trade-off is closing costs (typically 2% to 5% of the loan amount) and potentially a different interest rate.

Refinancing to remove PMI makes the most sense when: (1) your home has appreciated significantly, (2) current interest rates are similar to or lower than your existing rate, and (3) you plan to stay in the home long enough to recoup closing costs. Use our refinance break-even calculator to determine if the numbers work in your favor.

PMI vs. FHA Mortgage Insurance: An Important Distinction

The PMI removal rules described above apply to conventional loans only. FHA loans have a different type of mortgage insurance called Mortgage Insurance Premium (MIP), and the rules are considerably less favorable.

For FHA loans originated after June 3, 2013 with a down payment below 10%, MIP is required for the entire life of the loan — it does not automatically cancel when you reach 80% LTV. The only way to eliminate MIP on these loans is to refinance into a conventional loan once your equity is sufficient. This is a significant ongoing cost that borrowers should factor into their long-term comparison of FHA vs. conventional loans. See our PMI vs. MIP comparison tool for a detailed analysis.

Step-by-Step: How to Request PMI Cancellation

1. Confirm your current loan balance and the original purchase price. Calculate your current LTV: (loan balance ÷ original purchase price) × 100. If this is at or below 80%, proceed.
2. Review your payment history for the past 12 to 24 months. You should have no recent late payments.
3. Contact your loan servicer (the company you send payments to) in writing. Request PMI cancellation and ask what documentation they require.
4. Order an appraisal if required. Use an appraiser approved by your servicer.
5. Submit the written cancellation request with supporting documentation.
6. Your servicer must respond within 30 days. If approved, PMI cancellation will be reflected in your next billing cycle.

Use our PMI removal calculator to find your projected cancellation date based on your current loan details.