Overview

Private mortgage insurance (PMI) is a recurring cost many homeowners pay when they put less than 20% down on a conventional mortgage. Removing PMI reduces your monthly payment and increases the portion of each payment that goes to principal. This article explains exactly when PMI can be canceled, how to request cancellation, common exceptions (including FHA mortgages), and practical steps I use with clients to get PMI removed as quickly and cost-effectively as possible.

Why PMI Exists and How It Affects You

Lenders require PMI to protect against losses when a borrower has a smaller equity stake in the property. PMI is not part of your mortgage principal; it’s an insurance premium — usually added to the monthly mortgage payment — that protects the lender, not you. For many borrowers, the cost is between 0.3% and 1.5% of the original loan amount annually, depending on credit, down payment, and loan characteristics. Removing PMI restores that money to your cash flow or lets you apply more of each payment to principal.

Sources: CFPB on PMI requirements and the Homeowners Protection Act (HPA) (https://www.consumerfinance.gov) and Freddie Mac’s PMI guidance (https://www.freddiemac.com).

The Legal Milestones: 80% and 78% LTV (Conventional Loans)

Two standard benchmarks govern PMI cancellation for conventional conforming loans under the Homeowners Protection Act:

  • Borrower-requested cancellation: You can request PMI cancellation when your loan balance reaches 80% of the original value (an 80% LTV), based on the original property value at purchase or the value used at closing. The loan must be current and you may need to satisfy the lender’s proof-of-value and payment-history requirements.
  • Automatic termination: The lender must automatically terminate PMI when the balance reaches 78% of the original value (78% LTV), provided you are current on payments. After automatic termination, the servicer must stop charging PMI and send a written notice.

These rules apply to most conventional, fixed-rate mortgages. Check your mortgage note and disclosures for loan-specific timelines or exceptions. For a clear summary of borrower rights, see the Consumer Financial Protection Bureau’s guide on PMI and the HPA (CFPB).

FHA Mortgage Insurance (MIP) Works Differently

If you have an FHA loan, you’re paying mortgage insurance premiums (MIP), which follow different rules:

  • For FHA loans originated on or after June 3, 2013: If the original LTV was greater than 90%, the annual MIP typically remains for the life of the loan. If the original LTV was 90% or less, the MIP usually cancels after 11 years. (U.S. Department of Housing and Urban Development guidance.)
  • Because FHA’s MIP rules can keep insurance for decades, many homeowners refinance into a conventional loan once they reach sufficient equity to eliminate MIP.

Source: HUD (https://www.hud.gov) — verify your origination date and terms before assuming MIP will end automatically.

Practical Steps to Cancel PMI (Action Plan)

  1. Confirm your numbers
  • Find the original purchase price and loan amount on your closing disclosure.
  • Check your current principal balance on your latest mortgage statement.
  • Calculate current LTV: Current balance ÷ original value (or current appraised value if you plan to submit one) = LTV.
  1. Review your loan documents and servicer policies
  • Look for any language about PMI, LPMI (lender-paid MI), or single-premium MI. Lender-paid mortgage insurance (LPMI) is embedded in the interest rate and typically cannot be canceled because it’s not a separate monthly premium.
  1. Request cancellation in writing
  • When your balance approaches 80% LTV, contact your loan servicer and submit a formal, written request to cancel PMI. Ask for their specific requirements (appraisal, broker price opinion, proof of improvements, fees).
  1. Provide required documentation
  • You may need an appraisal (cost typically $300–$700) or other evidence of value such as a broker price opinion. Keep records of home improvements that add value.
  1. Meet payment-history rules
  • Most servicers require no late payments in the past 12 months and that there were no payments more than 30 days past due within the preceding two years. Confirm your servicer’s timeline.
  1. Follow up and get confirmation
  • Once accepted, the servicer must cancel PMI and provide written confirmation. If your balance already reached 78% LTV, automatic termination should happen without your request; confirm this in writing.

In my practice, clients who track amortization and request cancellation proactively often recover several months of unnecessary PMI faster than they would by waiting for automatic termination. I also advise budgeting for an appraisal fee and asking the servicer whether they accept a broker opinion or automated valuation model to avoid appraisal costs.

Common Roadblocks and How to Handle Them

  • Appraisals that come in low: If an appraisal shows a lower current value than expected, you can: (a) provide receipts and documentation for recent improvements; (b) order a second appraisal (if allowed); or (c) explore refinancing if rates and equity make sense. See our guide on refinancing pitfalls and options for low appraisals for more (link below).
  • Lender-paid MI (LPMI) or single-premium MI: These forms of insurance are structured differently and may not be cancelable through the servicer — you’ll need to negotiate a refinance or rate change to eliminate the cost.
  • Payment history issues: Even if you hit 80% LTV, late payments can block cancellation until you reestablish good standing. Maintain on-time payments and document any extenuating circumstances with your servicer.

Alternatives to Waiting

  • Make extra principal payments: Small additional payments focused on principal can accelerate equity growth.
  • Refinance into a conventional loan: If market rates and your credit profile are favorable, refinancing can remove PMI immediately if the new loan’s LTV is 80% or lower.
  • Get a home equity appraisal and request cancellation: If home values have risen since purchase, a new appraisal or broker price opinion can show sufficient equity to remove PMI earlier than scheduled.

Example from my practice: A client who paid an extra $100 per month to principal on a 30-year conventional loan hit the 80% LTV milestone roughly 3–4 years sooner than scheduled. We submitted an appraisal and removed PMI, freeing up $150 per month in savings.

Costs and Timing to Expect

  • Appraisal fees: $300–$700 on average, depending on market and property type.
  • Servicer processing: Once you meet the requirements, federal law requires timely action; written confirmations typically arrive within 30 days after cancellation.
  • Potential legal protections: Under the Homeowners Protection Act, lenders must terminate PMI automatically at 78% LTV and notify borrowers in writing when termination occurs. (CFPB)

FAQs — Short Answers

  • Can I force a cancellation earlier than 80% LTV? Not typically; you can request cancellation at 80% LTV. You can ask for a value-based cancellation (using a current appraisal) if you have enough equity based on today’s market value.
  • Does refinancing always remove PMI? Only if the new loan’s LTV is 80% or lower or you refinance into a loan that doesn’t require MI. Consider refinance costs and current rates.
  • What about VA loans? VA loans don’t require PMI but may have other funding fees. Check your loan type.

Links and Further Reading (Internal)

Sources and Authoritative Guidance

Professional Disclaimer

This article is educational and does not constitute individualized financial, tax, or legal advice. Mortgage rules and servicer policies vary; consult your loan servicer, a HUD-approved housing counselor, or a licensed mortgage professional for guidance specific to your loan.

Final Notes

If you want to pursue PMI cancellation, start by calculating your current LTV today and contacting your loan servicer for their exact requirements. In many cases a small, targeted effort—an appraisal or a few extra principal payments—can eliminate PMI earlier than you expect and deliver meaningful monthly savings.