How to Remove Private Mortgage Insurance (PMI)

Private Mortgage Insurance (PMI) is a type of insurance that lenders require when a homebuyer puts down less than 20% on a conventional mortgage. PMI protects the lender not the borrower if the borrower defaults on the loan. While it helps make homeownership more accessible, it also adds a significant monthly cost.

Fortunately, PMI doesn’t have to last forever. There are several ways to remove it some automatic, others requiring action from the homeowner.

---

1. Reach 20% Equity and Request Cancellation

The most common way to remove PMI is by reaching 20% equity in your home based on the original purchase price or current market value. Once you’ve paid down the loan balance to 80% of the home’s value, you can request that your lender cancel PMI.

You may be required to:

• Submit a written request

• Have a solid payment history

• Provide proof that the home hasn’t declined in value (often via an appraisal)

  
  

---

2. Automatic Termination at 78% Loan-to-Value

Even if you don’t request cancellation, PMI must be removed automatically when your loan balance reaches 78% of the original home value, assuming you’re current on your mortgage. This is a federal requirement under the Homeowners Protection Act (HPA), and it applies to most conventional loans.

Note that this only applies to the original amortization schedule, so extra payments won’t trigger automatic termination—you’ll need to request it manually if you reach 80% early.

---

3. Get a New Appraisal to Prove Value Increase

If your home has appreciated significantly due to market conditions or home improvements you may be able to eliminate PMI faster. Requesting a new appraisal can help prove your home’s increased value and show that your loan-to-value (LTV) has dropped below 80%.

Lenders usually require:

• At least 2 years of ownership

• A strong payment history

• A recent professional appraisal (you typically pay for this)

---

4. Refinance Into a New Loan

Another way to remove PMI is to refinance your mortgage. If your home’s value has increased and you qualify for a new loan at or below 80% LTV, refinancing into a conventional loan without PMI might make financial sense especially if interest rates have dropped since you bought.

However, refinancing involves closing costs and credit checks, so it’s best to run the numbers or consult a loan officer to see if it’s worth it.

---

Final Thoughts

While PMI helps borrowers purchase homes with lower down payments, it’s not meant to be permanent. Knowing when and how to remove it can save you hundreds or even thousands

of dollars per year. Track your mortgage balance, stay current on payments, and monitor your home’s market value. Whether through equity, refinancing, or a home reappraisal, shedding PMI is a smart financial move once you’re eligible.