Quick answer

Paying down your mortgage early — through extra monthly payments, lump-sum principal reductions, or a refinance — lowers your outstanding balance and can move you past the lender’s PMI removal point sooner. Under the federal Homeowners Protection Act (HPA), borrowers can request PMI cancellation once their loan balance reaches 80% of the original value; lenders must automatically cancel at 78% in many cases. However, rules and exceptions vary by loan type and servicer, so you’ll often need documentation (and sometimes an appraisal) to prove your equity.

How PMI removal normally works (the law and lender rules)

  • Homeowners Protection Act (HPA): For eligible conventional loans, the HPA (1998) gives borrowers the right to request PMI cancellation when their LTV reaches 80% of the original value and requires automatic termination when LTV reaches 78% if the borrower is current. Lenders may require a good payment history and evidence of property value (CFPB guidance explains borrower rights and steps) (CFPB: https://www.consumerfinance.gov).
  • Borrower-initiated cancellation: You can usually ask the servicer to cancel PMI once you reach 80% LTV based on the original purchase price or the lesser of original purchase price and the appraised value at purchase, though lenders may insist on a current appraisal at your cost to confirm market value.
  • Automatic termination: For most fixed-rate mortgages, lenders must cancel PMI automatically at 78% LTV based on the original amortization schedule — if you’re current on payments and there are no other triggers (foreclosure, payment default).

Authoritative sources and the nuance: The CFPB and HUD explain the HPA and differences between conventional PMI and government-backed mortgage insurance (FHA/VA). FHA mortgage insurance premiums (MIP) and VA funding fees follow different rules and generally can’t be removed the same way conventional PMI can (HUD/FHA rules) (HUD: https://www.hud.gov).

Why early payoff matters

  1. Faster elimination of a monthly cost. PMI typically runs from 0.3% to 1.5% of the original loan annually depending on your credit and down payment. Lowering principal reduces the time you pay this premium.
  2. More options. Once you’ve built 20% equity you can request cancellation, recast the loan (if the servicer allows), or refinance to a loan without PMI.
  3. Lower long-term interest cost when using extra principal payments prudently — though you should compare against other uses of cash.

What counts toward “early payoff” for PMI purposes

  • Extra monthly principal payments (above your scheduled payment). Specify on the payment that extra funds apply to principal. Keep clear records.
  • Lump-sum principal reductions (bonuses, tax refunds, or gifts applied to principal).
  • Shortening the amortization (recasting) after a large payment — some lenders offer a recast for a fee and lower monthly payment while preserving the same rate.
  • Refinancing to a lower LTV or a loan type without PMI.

Practical example (worked numbers)

Original purchase price: $333,333 (home price) — borrower makes 10% down = $33,333. Loan = $300,000.

  • 80% of purchase price = $266,666 (this is the typical borrower-request LTV threshold).
  • To reach 80% LTV, the borrower must reduce principal from $300,000 to $266,666 — a $33,334 principal reduction.
  • If borrower makes extra payments totaling $1,000/month ($500 more than required principal), they’ll hit that threshold faster — potentially in 2–3 years depending on amortization and interest rate — removing an example PMI cost of $150/month.

Note: Exact timing depends on loan rate, term, and how much of each payment applies to principal versus interest. Use your loan amortization schedule or ask your servicer for a payoff history showing principal reductions.

Cost-benefit checklist before you accelerate payoff

  • Appraisal cost: Lenders often require a new appraisal to confirm current market value. That can cost $300–$700 or more depending on region.
  • Refinance closing costs: If you refinance to eliminate PMI, consider break-even time vs how long you expect to keep the home.
  • Lost liquidity and opportunity cost: Extra principal payments are irreversible without a refinance or HELOC; compare expected investment returns or emergency-fund needs.
  • Recast fees: Some servicers charge a fee to recast; it’s often smaller than refinance costs.

Example decision point: If PMI costs $150/month ($1,800/year), and an appraisal is $450, paying for an appraisal to request PMI removal could be paid back in ~4 months after approval — often a sound choice.

Differences by loan type

  • Conventional PMI: Governed by HPA rules for cancellation and automatic termination. Borrowers have the clearest path to removal for conventional loans.
  • FHA MIP: Federal Housing Administration insurance follows different rules. For most FHA loans originated after June 3, 2013, MIP generally lasts for either 11 years (where original LTV ≤ 90%) or for the life of the loan (where original LTV > 90%). Removing MIP usually requires refinancing into a conventional loan when you have at least 20% equity (HUD: https://www.hud.gov).
  • VA loans: No PMI, but a VA funding fee typically applies at closing; removal isn’t relevant in the same way.

How to request PMI removal — step-by-step

  1. Confirm your LTV. Use your most recent mortgage statement and the original purchase price or order a broker price opinion (BPO) or appraisal if you think the market value changed.
  2. Check your loan type and HPA eligibility. If your mortgage is conventional and meets HPA coverage, you can request cancellation at 80% LTV.
  3. Contact your loan servicer. Ask for the servicer’s PMI cancellation procedure and any required documents.
  4. Provide documentation. Commonly required items: payoff history, proof of payments, recent mortgage statements, and a current appraisal (paid by borrower) if the servicer requests current market value.
  5. Keep payments current. Lenders typically require a clean payment history for 12 months before approving a removal request.
  6. Get confirmation in writing. If approved, get a written statement that PMI is canceled and confirm your monthly payment going forward.

Internal resources: our guides on practical steps and strategies can help you plan:

Alternatives to early payoff

  • Refinance: If rates are favorable and you can reach 20% LTV after closing costs, refinancing can eliminate PMI immediately. See our refinance checklist: When a Rate-and-Term Refinance Makes Sense for Homeowners — https://finhelp.io/glossary/when-a-rate-and-term-refinance-makes-sense-for-homeowners/
  • Recast: If your servicer offers recasting, a large principal payment reduces monthly payment without full refinance costs.
  • Piggyback loans or lender-paid mortgage insurance (LPMI): These are structured at origination and have trade-offs; LPMI can be cheaper monthly but not removable and may raise your interest rate.

Common mistakes I see in practice

  • Not specifying extra payments should apply to principal. If you don’t instruct the servicer, extra funds may prepay future payments rather than cut principal.
  • Forgetting appraisal costs. Borrowers assume removal is instant but often need a paid appraisal to prove market value.
  • Overlooking FHA rules. Many borrowers with FHA loans expect conventional-style PMI cancellation and are surprised by MIP rules.
  • Not asking the servicer for the exact cancellation process. Servicers vary in paperwork, required waiting periods, and appraisal preferences.

FAQs

  • Will my lender automatically remove PMI if I pay faster? If you meet automatic termination criteria (usually 78% LTV under HPA) and you are current, the servicer must cancel PMI for qualifying conventional loans. However, borrower-request cancellation at 80% requires you to ask and usually provide proof.
  • Does making extra payments change the automatic termination date? Yes — extra principal payments reduce outstanding balance and can trigger both borrower-request and automatic termination earlier.
  • Can I use an increase in home value to remove PMI? Yes. Lenders may accept a current appraisal that shows higher market value, lowering your LTV. They usually require the borrower to pay for the appraisal.

Final professional tips

  • Track your loan balance monthly and keep an amortization schedule. In my practice, clients who clearly track LTV and plan 12–24 months ahead get the best PMI outcomes.
  • Balance liquidity and payoff. If eliminating PMI requires exhausting emergency savings, consider smaller extra payments or a refinance instead.
  • Document everything. When you request PMI cancellation, submit a clear packet and follow up in writing. Keep copies of all communications.

Disclaimer

This article is educational and does not constitute personalized financial or legal advice. Rules vary by loan servicer and loan product; consult your mortgage servicer, a licensed mortgage professional, or a financial advisor for guidance specific to your situation.

Authoritative sources

  • Consumer Financial Protection Bureau (CFPB): Private mortgage insurance — rights and how to cancel (https://www.consumerfinance.gov)
  • U.S. Department of Housing and Urban Development (HUD/FHA): Mortgage insurance premium policy and guidance (https://www.hud.gov)
  • Federal Homeowners Protection Act (HPA) summaries: see CFPB and HUD resources for current details

(Last reviewed: 2025)