What Is PMI and Exactly When Can You Remove It?

Private Mortgage Insurance (PMI) protects the lender — not you — if you default. Yet you pay for it, often $100–$400/month, until you've built enough equity in your home. The good news: the Homeowners Protection Act gives you specific legal rights to cancel PMI, and there are ways to accelerate the process.

When Does PMI Apply?

PMI is required on conventional loans when your down payment is less than 20% of the purchase price. It's also required if your loan-to-value ratio (LTV) is above 80% when you refinance. The cost varies by lender and credit score, typically 0.5–1.5% of the loan amount annually.

The 3 Legal Ways to Remove PMI

• Automatic cancellation: Under the Homeowners Protection Act, lenders must automatically cancel PMI when your loan balance reaches 78% of the original purchase price — based on your scheduled payments. You don't need to request this.
• Request cancellation at 80%: You can request cancellation when your balance reaches 80% of the original value, assuming you have a good payment history and no second mortgage. Submit a written request to your servicer.
• New appraisal: If your home has appreciated significantly, you can pay for a new appraisal. If the current LTV is 80% or below based on current value, you can request PMI removal (typically requires 2+ years of payments on the loan).

Automatic Cancellation vs. Request Cancellation

Automatic cancellation happens at 78% LTV based on original value and scheduled payments — you don't have to do anything. But you can save months or years of PMI by proactively requesting cancellation at 80% LTV. The difference: if you've made extra principal payments, your balance reaches 80% earlier than scheduled.

How to Accelerate PMI Removal

• Make extra principal payments: Every dollar of extra principal payment moves you closer to 80% LTV.
• Home improvements that increase value: A new kitchen or addition can push your LTV below 80% based on current appraised value.
• Rising market values: Request a new appraisal if your home has appreciated substantially. Even 10–15% price growth on a 10% down purchase can push you to 80% LTV quickly.
• Refinance: If rates are favorable and your equity is 20%+, refinancing eliminates PMI and may lower your rate.

FHA MIP Is Different

FHA loans have Mortgage Insurance Premiums (MIP), not PMI — and the rules are different. For FHA loans originated after June 2013 with a down payment below 10%, MIP lasts for the entire loan term. You cannot cancel it. To remove MIP, you must refinance into a conventional loan once you have 20% equity.