You bought the house with seven percent down and you have been paying an extra hundred and forty dollars every month for something you have never once benefited from. That hundred and forty dollars is private mortgage insurance, and it protects your lender, not you. If you default, PMI pays the bank. You pay the premium. The arrangement is legal, standard across the industry, and entirely removable once your equity crosses a specific threshold. Thousands of homeowners keep paying PMI for years after they qualify to cancel it, simply because nobody told them they could stop.
Removing PMI is not automatic in most cases until a specific legal trigger point, and the process requires you to take action. The rules are set by federal law and by your loan servicer. The math is straightforward. The paperwork takes about an hour total, spread across a few weeks of waiting, and the payoff is the permanent elimination of a monthly bill that was never yours to begin with.
What PMI Actually Is and Why It Exists at All
Private mortgage insurance is a policy your lender requires when your down payment is less than twenty percent of the home’s purchase price. The logic is actuarial: borrowers with less equity default at higher rates, and the insurance covers the lender’s loss if that happens. PMI costs between 0.5 and 1.5 percent of the original loan amount per year, paid monthly as part of your mortgage payment. On a three hundred thousand dollar loan, that is between a hundred and twenty-five and three hundred and seventy-five dollars a month.
PMI applies to conventional loans. If you have an FHA loan, you pay MIP (mortgage insurance premium), which follows a different set of rules and in many cases cannot be removed without refinancing into a conventional loan. If you have lender-paid PMI, where the lender paid the premium upfront in exchange for a higher interest rate, you cannot cancel it because there is no monthly PMI to cancel. You are paying for it inside the rate. Borrower-paid PMI, the kind where a line item appears on your monthly statement, is the type most homeowners can actually cancel.
The single most common misunderstanding about PMI is that it goes away by itself when you reach twenty percent equity. In most cases, it does not. Federal law requires automatic termination only when your loan balance reaches seventy-eight percent of the original purchase price, based on the original amortization schedule, not the current market value. For a homeowner whose property value rose sharply, waiting for the automatic termination date means paying years of unnecessary premiums.
The Two Ways PMI Ends — Automatic Termination and Borrower-Initiated Cancellation
The Homeowners Protection Act of 1998, often called the PMI Cancellation Act, created two paths for PMI to end. The first is automatic termination. Your servicer must automatically cancel PMI on the date your loan is scheduled to reach seventy-eight percent loan-to-value ratio based on the original property value and the original amortization schedule. You do not need to request it. You do not need to pay for an appraisal. The servicer is required by law to terminate it, provided your payments are current. A single thirty-day late payment in the twelve months before the termination date can delay it.
The second path is borrower-initiated cancellation, and this is the one most homeowners should pursue. You have the right to request PMI cancellation when your loan-to-value ratio reaches eighty percent based on the current property value. The current value can be based on the original purchase price if you have paid down the principal enough, or it can be based on a new appraisal if your home has appreciated. You must have a good payment history, meaning no thirty-day late payments in the past twelve months and no sixty-day late payments in the past twenty-four months. Your servicer may also require that there are no second liens on the property, such as a home equity line of credit.
| Termination type | LTV threshold | Based on | Appraisal required | You must request it |
| Automatic | 78% | Original value + original schedule | No | No |
| Borrower-initiated | 80% | Current value (new appraisal or original) | Usually yes | Yes |
| Midpoint (FHA only) | N/A | Loan reaches half of original term | No | No |
The eighty percent threshold is calculated by dividing your current loan balance by the current property value. If you owe two hundred and forty thousand dollars on a home worth three hundred thousand, your LTV is exactly eighty percent and you qualify to request cancellation. If the home is worth three hundred and ten thousand, your LTV is about seventy-seven percent and you are well within the range.
Three Ways to Get Your Loan-to-Value Ratio Below 80 Percent
The fastest path is paying down the principal. Every extra dollar you send toward the principal reduces your LTV by that same dollar divided by the home’s value. A ten-thousand-dollar lump sum payment on a three-hundred-thousand-dollar home cuts your LTV by more than three percentage points. If you are close to the threshold, a single large principal payment can push you across the line without waiting months for regular amortization to do the work. Before making a large principal payment specifically to cancel PMI, contact your servicer and ask for the exact payoff amount needed to reach eighty percent LTV at the current appraised value.
Market appreciation is the path that requires no payment at all. If home values in your area have risen significantly since you bought, your LTV may have dropped below eighty percent even if your loan balance has barely moved. A home bought for three hundred thousand dollars with a two-hundred-and-seventy-thousand-dollar loan starts at ninety percent LTV. If that home is now worth three hundred and sixty thousand and you have paid the loan down to two hundred and sixty thousand, your current LTV is seventy-two percent. You qualify. The catch is that you must prove the higher value with an appraisal, which costs between three hundred and fifty and six hundred dollars.
Refinancing is the nuclear option. If you refinance into a new conventional loan with a loan-to-value ratio below eighty percent, the new loan has no PMI by definition. The trade-off is several thousand dollars in closing costs and a new interest rate that may be higher than your current one. Refinancing makes sense when you want to remove PMI and your current interest rate is high enough that the refinance saves you money on both fronts. It makes less sense when your current rate is below the market and PMI is the only thing you want to eliminate.
The Cancellation Process — Letters, Appraisals, and Waiting
Send a written request to your mortgage servicer. The contact information for PMI cancellation requests is usually listed on your monthly statement or in the servicing section of your online portal. The Consumer Financial Protection Bureau maintains a sample letter template that covers the required elements. State that you are requesting PMI cancellation under the Homeowners Protection Act, include your loan number, and cite your current loan balance and your estimated property value. Request written confirmation of the specific steps your servicer requires.
The servicer will likely require an appraisal to verify the current value. You pay for it, typically four hundred to five hundred dollars. Some servicers accept a broker price opinion, or BPO, which costs about a hundred and fifty to two hundred dollars and involves a licensed real estate agent evaluating the property rather than a full certified appraisal. Ask your servicer whether a BPO is acceptable before ordering the more expensive option. If the appraisal comes in lower than expected and your LTV is above eighty percent, you have paid for an appraisal and still have PMI. Run the numbers before you request it. If your estimated LTV is borderline, the cost of the appraisal may exceed the PMI payments you would save by waiting for automatic termination.
After the appraisal confirms an LTV at or below eighty percent, the servicer must cancel PMI within thirty days of receiving the appraisal. Some servicers move faster. You do not need to keep following up. If the thirty days pass and PMI still appears on your statement, file a complaint with the CFPB. A CFPB complaint on a clear HPA violation gets a response from the servicer’s compliance department, which is not the same department that answers the customer service line.
For a homeowner paying a hundred and fifty dollars a month in PMI, waiting an extra year for automatic termination instead of requesting cancellation costs eighteen hundred dollars. The appraisal costs four hundred. The math could not be simpler, and yet most homeowners never run it.
When PMI Cannot Be Removed and What to Do Instead
FHA loans with mortgage insurance premium follow rules that are far less borrower-friendly. For FHA loans originated after June 2013 with less than ten percent down, MIP lasts for the entire life of the loan. There is no eighty percent threshold and no automatic termination. The only way out is to refinance into a conventional loan. For FHA loans with more than ten percent down, MIP cancels after eleven years. These rules changed multiple times over the past two decades, so confirm the specific terms of your FHA loan before making any plans.
Lender-paid PMI cannot be canceled because there is no monthly premium to cancel. You accepted a higher interest rate in exchange for the lender covering the PMI premium upfront. The cost is baked into the rate for the life of the loan. A refinance is the only way out. A second lien like a home equity line of credit can also block PMI cancellation, even if your LTV is below eighty percent, because the combined loan-to-value ratio including the second lien is what the servicer evaluates. Paying off the HELOC removes the obstacle.
If you had a late payment within the past twelve months, wait until a full year has passed with no new late payments before requesting cancellation. The servicer will deny the request and you will have wasted the appraisal fee. The payment history requirement is strict and mechanical. A single thirty-day late resets the clock.
FAQ — Removing PMI From a Mortgage
Does PMI automatically go away when I reach 20 percent equity?
Not quite. PMI is automatically canceled only when your loan balance reaches 78 percent of the original purchase price, based on the original amortization schedule, not the date you reach 20 percent equity based on market appreciation. The automatic cancellation date was printed on your closing documents. You can request cancellation at 80 percent LTV, but you must initiate that process yourself. It will not happen on its own.
Is paying for an appraisal to remove PMI worth it?
Divide the appraisal cost by your monthly PMI premium. If the result is less than the number of months until your automatic termination date, the appraisal saves you money. An appraisal that costs four hundred dollars and eliminates a hundred-and-fifty-dollar monthly PMI payment pays for itself in under three months. If your automatic termination date is two years away, you save about thirty-two hundred dollars after the appraisal cost. If your home value increase is questionable and the appraisal might not get you to eighty percent, wait until you are more confident in the valuation.
Can I remove PMI if my home value went up even though I did not renovate?
Yes. Market appreciation counts toward your LTV calculation regardless of the cause. You do not need to have remodeled the kitchen. If comparable homes in your neighborhood are selling for more than you paid, your home is likely worth more, and that higher value reduces your LTV just as effectively as paying down the principal. The appraiser will use recent comparable sales in your area to determine the current market value. Renovations help, but they are not required.
Last modified: June 12, 2026
