Private mortgage insurance (PMI) is an additional cost to your monthly mortgage payment, but you can remove it once your mortgage balance reaches 80% of your home’s original value. Lenders are required to automatically cancel PMI at 78% loan-to-value (LTV) if the loan is current.
There are ways to remove PMI sooner, such as through home price appreciation, extra mortgage payments, or refinancing into a new loan.
Understanding how and when PMI can be removed can help lower your monthly payment and reduce the overall cost of your mortgage.
How to Request PMI Removal from Your Mortgage
Private mortgage insurance is not permanent. Once you have enough equity in your home, you can request the removal of PMI to reduce your monthly mortgage payment.
For most conventional loans, PMI can be eliminated once your loan-to-value (LTV) ratio reaches specific thresholds, depending on your loan terms and lender requirements.
Homeowners usually remove PMI through one of the following methods:
1. Request PMI Cancellation at 80% Loan-to-Value (LTV)
You can formally ask your mortgage servicer to remove PMI when your loan balance reaches 80% of the home’s original value, provided you meet payment history and eligibility criteria.
Most lenders require a good payment history, current loan status, no recent late payments, no additional liens, and proof that the property value has not declined.
Submitting a written request to your servicer initiates the PMI cancellation process.
2. Automatic PMI Termination at 78% LTV
If you do not request PMI removal earlier, lenders must automatically cancel PMI once your balance reaches 78% of the home’s original value, as per the loan’s amortization schedule, provided your loan is current.
This rule is governed by the Homeowners Protection Act (HPA) and applies to most conventional mortgages.
3. Early PMI Removal Using a New Appraisal
If your home’s value has significantly increased since purchase, some lenders allow early PMI removal based on a new appraisal.
An updated appraisal may show that your current loan balance is less than 80% of the home’s value, making you eligible to cancel PMI sooner than scheduled.
4. Making Extra Principal Payments
Paying extra towards your loan principal can accelerate the reduction of your mortgage balance. Reaching the 80% LTV threshold earlier may allow you to request PMI removal ahead of schedule.
Consistent small additional payments can shorten the timeline to achieve the required equity level.
5. Refinancing Your Mortgage
If your home’s value has increased or your loan balance has decreased sufficiently, refinancing into a new mortgage with an LTV of 80% or less can eliminate PMI entirely.
Refinancing replaces your current loan with a new one and may offer opportunities for a lower interest rate, adjusted loan term, or reduced monthly payment.
However, refinancing typically involves closing costs, so it’s essential to evaluate potential savings before deciding on this option.