Private mortgage insurance (PMI) is the price of buying with less than 20% down on a conventional loan. It protects the lender — not you — against default, and it adds $50–$400+ to your monthly payment depending on your loan amount and credit score. The good news: there are four distinct ways to remove it, and you don’t have to wait for it to disappear on its own.
How PMI Works
PMI is tied to your loan-to-value ratio (LTV) — the percentage of the home’s value still owed on the mortgage. It’s required when LTV is above 80% (i.e., when you have less than 20% equity).
As you make payments and as your home’s value (potentially) rises, your LTV decreases. Once it reaches a certain threshold, PMI can be eliminated — by federal law or by lender agreement.
Method 1: Automatic Cancellation at 78% LTV
Under the Homeowners Protection Act, lenders are required to automatically cancel PMI when your loan balance reaches 78% of the original purchase price — based on your scheduled amortization payments alone.
No action required. No request to file. The lender must cancel it automatically by the date this milestone is scheduled to occur under your original amortization schedule.
The catch: this uses the original purchase price, not the current market value. If your home has appreciated, you’ve likely reached 78% LTV faster in reality — but the automatic cancellation doesn’t account for that. See Method 3.
Method 2: Request Cancellation at 80% LTV
You can request PMI cancellation from your lender once your loan balance reaches 80% of the original purchase price — without waiting for the automatic 78% trigger.
Requirements typically include:
- A written request to the loan servicer
- A good payment history (usually no payments 30+ days late in the prior 12 months and none 60+ days late in the prior 24 months)
- Confirmation that there’s no subordinate lien (no second mortgage or HELOC) on the property
Your lender is not required to immediately approve a request at 80% — they may require a brief waiting period — but the request puts you ahead of the automatic 78% schedule by typically 2–3 years on a standard amortization.
Method 3: Appraisal-Based Cancellation (Using Appreciation)
If your home has appreciated significantly since purchase, you may have reached 20% equity — 80% LTV — faster than your amortization schedule suggests. In this case, you can request an appraisal to establish the current value and use that to document your equity.
Lenders have different rules here, but generally:
- If you’ve owned the home for at least 2 years and the new appraisal supports at least 25% equity (75% LTV), PMI can typically be removed
- If you’ve owned for at least 5 years and the appraisal supports 20% equity (80% LTV), removal is usually possible
- Some lenders require the appraisal to be ordered through them (at your expense, typically $300–$600)
This method is particularly powerful in markets that have seen strong appreciation. A home purchased for $400,000 that now appraises at $500,000 gives the buyer an extra $100,000 in equity beyond what payments alone have produced.
Method 4: Refinance Into a Conventional Loan Without PMI
If current rates are favorable and you have 20% or more equity based on current market value, refinancing into a new conventional loan at 80% LTV or lower eliminates PMI entirely — because the new loan doesn’t require it.
This approach makes most sense when:
- Your home has appreciated substantially and you have significant equity
- Rates have dropped enough to justify refinancing
- You’ve already paid a meaningful amount of PMI and want to stop
The break-even math on refinancing (closing costs vs. monthly savings from eliminating PMI and/or lowering the rate) determines whether this is worthwhile. The Refinance Calculator can model this for your numbers.
What About FHA Mortgage Insurance?
FHA loans have a different structure: mortgage insurance premium (MIP) rather than PMI. For loans originated after June 2013 with less than 10% down, MIP lasts the life of the loan — it cannot be removed by request or appraisal. The only way to eliminate it is to refinance into a conventional loan once you have sufficient equity.
If you have an FHA loan and have built 20% equity through payments and/or appreciation, refinancing into a conventional loan without PMI is often worthwhile once rates are favorable.
PMI Removal Checklist
- Know your current LTV. Check your most recent mortgage statement for the outstanding balance; divide by your original purchase price to estimate LTV.
- If LTV is at or near 80% based on original purchase price: send a written cancellation request to your loan servicer.
- If your home has appreciated: contact your servicer about their appraisal-based cancellation process.
- If neither applies yet: use the Amortization Calculator to find the exact date your scheduled payments will reach the 78% automatic cancellation threshold.