How to Remove PMI From Your Mortgage

PMI costs $50 to $300 per month and is removable once your loan-to-value ratio hits 80 percent. Request cancellation in writing from your servicer, pay for an appraisal (or wait for auto-cancellation at 78 percent based on the original schedule), and the insurance drops off your next payment. FHA loans require a refinance into a conventional loan to remove mortgage insurance.

What PMI Actually Is

Private mortgage insurance protects the lender, not you, against default. Conventional loans require PMI when the down payment is less than 20 percent. The premium runs 0.3 to 1.5 percent of the loan balance per year, paid monthly with your mortgage payment.

On a $350,000 loan with 5 percent down and a 720 credit score, PMI might cost $145 per month. On the same loan with a 660 credit score, it could cost $300 per month. Lower credit scores pay more for the same coverage.

The cost continues until you cancel it, the loan auto-terminates the insurance, or you refinance. Federal law sets the rules. Knowing them saves real money.

The Three Cancellation Pathways

Path 1: Borrower-Requested Cancellation at 80 Percent LTV

You can request cancellation when your loan-to-value ratio reaches 80 percent based on either:

• Original value (purchase price or original appraised value, whichever is less) using the scheduled balance from the amortization table
• Current value if home values rose, requires a new appraisal

You must submit the request in writing to your servicer. The servicer is required to respond. Cancellation requirements per the Homeowners Protection Act:

• Loan is in good standing
• No payments 30-plus days late in the past 12 months
• No payments 60-plus days late in the past 24 months
• Property has not declined in value (servicer may require appraisal)
• No subordinate liens on the property at the time of cancellation (a HELOC counts; pay it off first or wait)

If using current value (home appreciated), the servicer orders a Broker Price Opinion or full appraisal at your cost. BPO runs $100 to $200, appraisal $500 to $700.

Path 2: Automatic Termination at 78 Percent LTV

Federal law requires the servicer to auto-cancel PMI when the loan balance reaches 78 percent of the original value, based on the original amortization schedule. The borrower does not have to request it. The borrower must be current on payments.

This is the simplest path. It happens on its own, but only based on the original schedule, not current value. If you made extra principal payments, you hit 78 percent earlier on the actual balance but auto-termination still uses the scheduled balance. Request cancellation at 80 percent based on current balance instead to save time.

Path 3: Mid-Term Termination at 50 Percent of the Loan Term

Federal law also requires PMI to terminate at the midpoint of the loan term regardless of LTV, as long as the borrower is current on payments. For a 30-year loan, that is at the 15-year mark. This is a backstop for borrowers whose property values dropped and never recovered.

Step 1: Confirm Your Current LTV

Pull two numbers:

• Current loan balance from your most recent statement
• Original purchase price from your closing documents (or original appraised value if lower)

Divide balance by purchase price. If the result is 0.80 or less, you can request cancellation today.

If you think the home has appreciated meaningfully, also research current value:

• Look at recent comparable sales on Zillow, Redfin, or your county assessor site
• Get a quick value estimate from your real estate agent
• Ask your servicer what appraised value they will require

Example. You bought a home for $300,000 with 10 percent down. Your loan was $270,000. You have paid down to $260,000. Original-value LTV is 260,000 / 300,000 = 86.7 percent. Not yet cancellable based on original value. But your local market appreciated and the home is now worth $340,000. Current-value LTV is 260,000 / 340,000 = 76.5 percent. You can request cancellation based on current value, paying for an appraisal to confirm.

Step 2: Send a Written Request to Your Servicer

The originator of your loan is not the same as the servicer. The servicer is whoever you send your monthly payment to. Look at your statement for the name.

Send a letter (email is fine for most servicers; certified mail is safest for record). Include:

• Loan number
• Your full name
• Property address
• Statement that you are requesting cancellation of PMI under the Homeowners Protection Act
• Whether you are requesting based on original value or current value
• Confirmation that you are current on payments

The servicer must acknowledge the request and provide their requirements within 30 days. Most have a standard PMI cancellation form on their website.

Step 3: Pay for the Appraisal (If Needed)

If requesting cancellation based on current value, the servicer orders the valuation. You cannot order your own. The servicer chooses an approved appraiser or BPO provider and bills you for the cost.

Tips to maximize value at appraisal:

• Make obvious repairs (broken windows, peeling paint, missing handrails)
• Clean and declutter every room
• List recent improvements (new roof, new HVAC, kitchen remodel) on a one-page sheet for the appraiser
• Compile 3 to 5 recent comparable sales that support your value claim

Step 4: Receive the Decision

The servicer reviews the appraisal and your payment history. Typical timeline is 30 to 60 days from request to decision.

If approved, PMI is removed from your next monthly payment. The servicer should also refund any PMI paid in advance (rare). Your monthly payment drops by the PMI amount immediately.

If denied because the value did not support 80 percent LTV, you have a few options:

• Wait for the loan to amortize further and try again in 12 to 24 months
• Make a large principal payment to push the balance below 80 percent LTV on the original value
• Refinance into a new conventional loan with no PMI (if rates are reasonable)

FHA Loans: Different Rules

FHA loans charge MIP (Mortgage Insurance Premium), not PMI, and the rules are stricter:

• Original down payment less than 10 percent. MIP lasts the life of the loan. The only way to remove it is to refinance into a conventional loan.
• Original down payment 10 percent or more. MIP can be removed after 11 years.

Both categories also pay an upfront MIP of 1.75 percent of the loan, paid at closing or rolled into the balance.

If you have an FHA loan and now have 20 percent equity, refinancing into a conventional loan eliminates MIP forever. Run the math: the rate may be slightly higher, but the savings from eliminating MIP usually justify the refinance. See how to refinance your mortgage for the full process.

VA and USDA: Different Again

VA loans have no PMI. They charge a one-time funding fee at closing (1.25 to 3.3 percent of the loan), which can be financed. No monthly insurance cost. Nothing to cancel.

USDA loans charge an annual fee of 0.35 percent of the loan balance, paid monthly. This continues for the life of the loan. The only way to remove it is to refinance into a conventional loan.

When Refinancing Beats Waiting

If your loan is FHA with lifetime MIP, refinance into conventional once you have 20-plus percent equity. Even if the new rate is 0.25 to 0.5 percent higher, the MIP savings usually exceed the rate increase.

If your loan is conventional and you have 20-plus percent equity but the servicer is dragging or denying cancellation, refinance into a new conventional loan with no PMI. This is rare but happens, especially when servicers stack appraisal requirements or use conservative valuations.

If your loan is conventional and you have less than 20 percent equity but rates dropped 1-plus percent, the refinance still wins on rate alone. PMI cancellation comes later.

Use the refinance break-even calculator to confirm.

Common Mistakes

Waiting for auto-termination when you could request cancellation earlier. Borrowers who made extra principal payments hit 80 percent LTV earlier than the schedule says. Request cancellation explicitly.

Not knowing your servicer changes. Servicers transfer loans constantly. Check your most recent statement to confirm who to contact.

Trying to cancel during a refinance application. The servicer of the loan you are refinancing has no reason to cancel before paying off. Wait for the refinance to close, which terminates PMI automatically.

Ignoring the second-lien rule. A HELOC or second mortgage usually prevents PMI cancellation. Pay it off or close it before requesting cancellation.

Paying a "PMI removal service." These services charge $300 to $1,000 to send the same letter you can send yourself for free. Skip them.

What to Do Next

If you have a conventional loan and believe you are at 80 percent LTV, send the written request today. If you have an FHA loan with 20-plus percent equity, see how to refinance your mortgage to switch to conventional.

To estimate your new payment without PMI, use the mortgage payment calculator. Combine PMI removal with other ways to lower your mortgage payment for the biggest impact.

Citations

• Consumer Financial Protection Bureau, PMI cancellation rights: https://www.consumerfinance.gov/
• Federal Housing Finance Agency, mortgage insurance: https://www.fhfa.gov/
• HUD, FHA mortgage insurance: https://www.hud.gov/