How to Remove PMI
Four proven ways to cancel private mortgage insurance — and the critical difference between conventional PMI and FHA MIP that every homeowner needs to understand before they try to remove it.
What Is PMI and Why Do You Pay It?
Private mortgage insurance (PMI) is a policy that protects the lender — not you — in the event you default on your loan. Lenders require it on conventional loans when the borrower puts down less than 20% of the purchase price. The down payment threshold of 20% is the point at which lenders consider the loan risk low enough that insurance is no longer needed.
PMI is not a penalty for being a first-time buyer or having less savings — it is simply the cost of accessing a lower down payment. Without PMI, lenders would not offer 3%, 5%, or 10% down payment options to most borrowers. PMI makes low-down-payment lending possible by protecting the lender from the higher default risk associated with loans that have less equity cushion.
How Much Does PMI Cost?
| Down Payment | LTV at Origination | Typical Annual PMI Rate | Monthly PMI on $350,000 Loan |
|---|---|---|---|
| 3% down | 97% LTV | 0.9% – 1.5% | $263 – $438/month |
| 5% down | 95% LTV | 0.8% – 1.2% | $233 – $350/month |
| 10% down | 90% LTV | 0.5% – 0.9% | $146 – $263/month |
| 15% down | 85% LTV | 0.3% – 0.5% | $88 – $146/month |
| 20% down | 80% LTV | No PMI required | $0 |
PMI is temporary. Unlike an interest rate or property tax, PMI has a defined endpoint. Once you reach 20% equity in your home — through payments, appreciation, or both — you have legal rights to remove it. The key is knowing exactly how and when to act.
PMI vs. FHA MIP — A Critical Distinction
This is the most important thing to understand before trying to remove mortgage insurance: conventional PMI and FHA mortgage insurance premium (MIP) are governed by completely different rules. The removal process for one does not apply to the other.
| Feature | Conventional PMI | FHA MIP |
|---|---|---|
| Who it insures | Private insurer (Genworth, MGIC, Radian, etc.) | Federal Housing Administration (FHA) |
| Upfront cost | None (monthly only, or financed as SPMI) | 1.75% of loan amount financed into loan |
| Annual cost | 0.3% – 1.5% depending on LTV and credit | 0.55% for most 30-yr loans (2026) |
| Cancellation at 20% equity | Yes — legal right under federal law | No — does not apply to FHA loans |
| Automatic cancellation | Yes — at 78% LTV based on original value | No automatic cancellation for most FHA loans |
| Removed by refinancing | Yes — if new loan is conventional at 80%+ LTV | Yes — refinance into conventional loan |
| Duration (loans after June 2013) | Until 80% LTV reached | Life of loan if <10% down; 11 years if 10%+ down |
FHA MIP does not cancel at 20% equity. If you took out an FHA loan after June 3, 2013 with less than 10% down, your mortgage insurance premium lasts for the entire life of the loan — regardless of how much equity you accumulate. The only way to remove FHA MIP in this case is to refinance into a conventional loan. This is one of the most important reasons to evaluate whether a conventional loan makes more sense than FHA even if FHA has a slightly lower rate.
Four Ways to Remove PMI
There are four distinct paths to eliminating private mortgage insurance on a conventional loan. Each has different requirements, timelines, and costs:
| Method | How It Works | Timeline | Cost |
|---|---|---|---|
| 1. Automatic cancellation | Lender cancels when scheduled payments reach 78% LTV | Happens automatically — no action required | Free |
| 2. Request cancellation at 80% LTV | You request removal once balance reaches 80% of original value | When you hit 80% based on original purchase price | Free (may need good payment history verification) |
| 3. New appraisal — appreciation | Home value increased; new appraisal shows 80% LTV on current value | Most lenders require 2-5 years of seasoning | $400-$700 appraisal fee |
| 4. Refinance | Refinance into new conventional loan at 80% LTV or lower | When rates and equity make it financially advantageous | Full closing costs (2%-4% of loan amount) |
Automatic Cancellation Under the Homeowners Protection Act
The Homeowners Protection Act of 1998 (HPA) is the federal law that governs PMI cancellation rights on conventional loans. It establishes two key protections:
Automatic Cancellation at 78% LTV
Your lender is legally required to automatically cancel PMI on the date your scheduled loan balance — based on the original amortization schedule and original purchase price — reaches 78% of the original property value. This happens automatically; you do not need to request it. However, it is based on the scheduled balance (assuming you have made all payments on time), not the actual balance.
Important distinction: The automatic cancellation trigger uses the original purchase price or appraised value at origination — not the current market value of your home. Even if your home is now worth significantly more, automatic cancellation is still calculated against the original value. To take advantage of appreciation, you need to request cancellation using a new appraisal (see Method 3).
Final Termination at Loan Midpoint
The HPA also requires that PMI be terminated when the loan reaches its midpoint — for a 30-year loan, that is month 180 (year 15) — as long as you are current on payments. This is a backstop provision that ensures PMI cannot continue indefinitely even if LTV never reached 78% on the scheduled amortization.
What You Need to Qualify for Automatic Cancellation
- The loan must be current — no payments 30 or more days late in the past 12 months, no payments 60 or more days late in the past 24 months
- The property must not have a subordinate lien (second mortgage or HELOC) that would indicate reduced net equity
- The property value must not have declined below the original value at origination
How to Request Early PMI Cancellation
You do not have to wait for automatic cancellation at 78% LTV. The HPA gives you the right to request PMI removal once your loan balance drops to 80% of the original purchase price — two percentage points earlier. Here is exactly how to do it:
- Confirm your current balance and LTV: Log into your loan servicer’s website or call them to get your current unpaid principal balance. Divide that by your original purchase price or appraised value at origination. If the result is 0.80 or below, you are eligible to request cancellation.
- Check your payment history: The servicer will verify that you have no 30-day late payments in the past 12 months and no 60-day late payments in the past 24 months. Catch up on any outstanding amounts before submitting your request.
- Submit a written cancellation request: Send a written request to your loan servicer (not just a phone call) stating that you are requesting PMI cancellation under the Homeowners Protection Act. Include your loan number and the calculation showing your LTV is at or below 80%.
- Wait for servicer response: The servicer has 30 days to respond. If they require a property value certification, they may order a broker price opinion (BPO) or appraisal at your expense. If your current balance is at 80% of the original value, they generally cannot require a new appraisal — the original value controls.
Making extra payments to accelerate PMI removal: If you are close to the 80% LTV threshold, a single extra principal payment can push you over the line and save months of PMI. Use the mortgage payment calculator below to model exactly how much extra principal you need to pay to reach 80% LTV — and compare that cost against the months of PMI you would save.
Removing PMI Through Refinancing
If your home has appreciated significantly since you bought it, a refinance can eliminate PMI even if your loan balance has not yet reached 80% of the original purchase price. The new loan is based on the current appraised value — if the new loan amount is 80% or less of that current value, there is no PMI on the new loan.
When Refinancing for PMI Removal Makes Sense
- Home values have risen substantially. If you put 5% down on a $350,000 home and it is now worth $420,000, your remaining loan balance may be well under 80% of the new value — qualifying for no-PMI conventional financing.
- Rates are comparable or lower. If you can eliminate PMI and secure a similar or lower interest rate, the monthly savings can be substantial with minimal break-even time on closing costs.
- You are on an FHA loan. Refinancing from FHA to conventional is the primary way to escape FHA MIP on post-2013 loans with less than 10% down. Once you have 20% equity based on current value, a conventional refinance eliminates mortgage insurance entirely.
Refinance Break-Even Analysis
Refinancing carries closing costs typically ranging from 2%-4% of the loan amount. Before refinancing solely to remove PMI, calculate the break-even: divide the total closing costs by the monthly savings (PMI savings plus or minus any payment change from the rate difference) to find how many months it takes to recoup the cost.
| Scenario | Monthly PMI Saved | Closing Costs | Break-Even |
|---|---|---|---|
| $350,000 loan, remove $200/mo PMI, flat rate | $200/month | $7,000 (2%) | 35 months (~3 years) |
| $350,000 loan, remove $200/mo PMI, rate drops 0.5% | $200 + ~$100 rate savings = $300/month | $7,000 | 23 months (~2 years) |
| $350,000 loan, remove $200/mo PMI, rate rises 0.5% | $200 – ~$100 rate cost = $100/month net | $7,000 | 70 months (~6 years) |
Calculate Your Mortgage Payment Without PMI
Model your current payment vs. a payment without PMI to see exactly how much you save — and whether refinancing makes financial sense.
Getting Out of FHA Mortgage Insurance
For borrowers with FHA loans originated after June 3, 2013 with less than 10% down, FHA MIP lasts for the life of the loan. There is no request process, no appraisal-based removal, and no automatic cancellation at 78% LTV. Your only option to eliminate FHA MIP is to refinance out of the FHA loan entirely.
FHA MIP Rules by Loan Date and Down Payment
| Loan Origination Date | Down Payment | Annual MIP Duration |
|---|---|---|
| Before June 3, 2013 | Any amount | Cancels at 78% LTV (same as conventional) |
| June 3, 2013 or after | Less than 10% | Life of loan — never cancels automatically |
| June 3, 2013 or after | 10% or more | 11 years (then automatically cancelled) |
The FHA-to-Conventional Refinance Strategy
Once you have built 20% equity in your home (based on a current appraisal), you can refinance from your FHA loan into a conventional loan with no PMI required. This is the most common and cost-effective exit from FHA mortgage insurance. The key requirements:
- Current appraised value must support a loan-to-value ratio of 80% or lower on the new conventional loan
- Credit score must meet conventional minimums (620+; 740+ for best rates)
- Income must qualify under conventional DTI guidelines
- 12 months of on-time payment history on the FHA loan preferred
How quickly can you reach 20% equity on an FHA loan? It depends on home appreciation and your down payment. If you put 3.5% down and your home appreciates 5% annually, you may reach 20% equity in 3-4 years. In flat markets, it takes longer. Check your current home value against your loan balance annually to know when refinancing makes sense.
