What Is PMI and How to Remove It

If you bought your home with less than 20% down, you're almost certainly paying private mortgage insurance — PMI. It's one of the most frustrating costs of homeownership because it protects your lender, not you, and it can cost hundreds of dollars every month.

The good news: PMI is temporary. You can remove it, and in many cases, you can remove it sooner than you think. This guide explains exactly how.

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What PMI Is (and Isn't)

Private Mortgage Insurance (PMI) is insurance that protects your lender if you stop making payments and your home goes into foreclosure. It covers the lender's losses — not yours.

PMI is NOT:

• Homeowner's insurance (that protects your home against damage)
• Mortgage life insurance (that pays off your loan if you die)
• [Title insurance](/blog/title-search-explained) (that protects against ownership disputes)

PMI only applies to conventional loans. FHA loans have their own version called MIP (Mortgage Insurance Premium), which has different rules — we'll cover that separately below.

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How Much Does PMI Cost?

PMI typically costs 0.2% to 2.0% of your loan amount per year, depending on:

• Your credit score (higher score = lower PMI)
• Your down payment percentage (closer to 20% = lower PMI)
• Your loan amount
• Your loan type (fixed vs. adjustable)
• Your PMI provider

PMI Cost Calculator

Here's a quick formula:

Annual PMI Cost = Loan Amount × PMI Rate
Monthly PMI Cost = Annual PMI Cost ÷ 12

Example:

• Home price: $400,000
• Down payment: 5% ($20,000)
• Loan amount: $380,000
• PMI rate: 0.55% (typical for 5% down, good credit)

Annual PMI: $380,000 × 0.0055 = $2,090
Monthly PMI: $2,090 ÷ 12 = $174/month

Typical Monthly PMI by Down Payment and Credit Score

Based on a $350,000 loan amount. Your actual rate may vary.

Over the life of PMI payments, you could easily spend $5,000 to $30,000+ — money that goes entirely to insuring your lender's risk. That's why removing it as soon as possible matters.

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How to Remove PMI: The Exact Steps

The Homeowners Protection Act (HPA) of 1998 gives you specific legal rights to remove PMI on conventional loans originated after July 29, 1999. Here are your three paths:

Path 1: Request Cancellation at 80% LTV (Your Right)

When your loan balance reaches 80% of the original value of your home, you have the legal right to request PMI cancellation.

LTV (Loan-to-Value) formula:

LTV = Current Loan Balance ÷ Original Property Value × 100

Example:

• Original purchase price: $400,000
• Current loan balance: $320,000
• LTV: $320,000 ÷ $400,000 = 80%

At 80% LTV, you can request cancellation. Here's what to do:

Step 1: Check your loan balance. Look at your most recent mortgage statement or log into your servicer's website.

Step 2: Determine when you'll hit 80% LTV. Use your [amortization schedule](/blog/amortization-schedule-guide) (your servicer can provide one, or use an online amortization calculator). Find the month when your balance drops below 80% of the original purchase price.

Step 3: Contact your servicer in writing. Send a written request to cancel PMI. Your servicer must cancel it if you meet these conditions:

• Your loan balance is at or below 80% of the original value (purchase price or appraised value at time of purchase, whichever is lower)
• You're current on your payments (not delinquent)
• You have a good payment history (no 30-day late payments in the past 12 months, no 60-day late payments in the past 24 months)
• There are no other liens on the property (e.g., a [second mortgage](/blog/best-heloc-lenders-2026) or HELOC that pushes combined LTV above 80%)

Step 4: Your servicer may require proof. They might ask for a new appraisal or a Broker Price Opinion (BPO) to confirm your home's current value — but only if they're using current value rather than original value. At 80% of original value, they generally cannot require an appraisal.

Path 2: Automatic Termination at 78% LTV (Required by Law)

Even if you never ask, your lender is legally required to cancel PMI when your loan balance reaches 78% of the original property value, based on the original amortization schedule.

This is automatic. You don't have to do anything. But "automatic" doesn't always mean "immediate" — it happens based on when the balance was scheduled to hit 78%, which doesn't account for extra payments you may have made.

Important: Automatic termination uses the original amortization schedule, not your actual balance. If you've been making extra payments, your actual balance might be at 78% long before the scheduled date — in which case you should use Path 1 to request cancellation sooner.

Path 3: Request Cancellation Based on Current Value (Home Appreciation)

If your home has increased in value — through [market appreciation](/blog/equity-vs-appreciation), improvements, or both — you may be able to remove PMI based on the current value of your home, even if you haven't paid down your loan to 80%.

The rules (these vary slightly by servicer but generally follow industry standards):

• If your loan is 2–5 years old: You need a current LTV of 75% or less (based on current appraised value)
• If your loan is 5+ years old: You need a current LTV of 80% or less (based on current appraised value)

Example:

• You bought 3 years ago for $400,000 with 5% down ($380,000 loan)
• Your current loan balance: $360,000
• Based on original value: LTV = $360,000 ÷ $400,000 = 90% (too high)
• But your home is now worth $500,000: LTV = $360,000 ÷ $500,000 = 72% (qualifies!)

Steps:

1. Contact your servicer and request PMI cancellation based on current property value
2. Your servicer will likely require a new appraisal at your expense ($400–$600)
3. The appraiser must be from the servicer's approved list (you can't choose your own)
4. If the appraisal confirms sufficient equity, PMI is removed
5. If it doesn't, you're out the appraisal cost — so do your homework first

Pro tip before paying for an appraisal: Use online [home value](/blog/appraisal-process-explained) estimators (Zillow, Redfin, Realtor.com) and the FHFA House Price Index Calculator to estimate your current value. If you're clearly over the threshold, it's worth the appraisal cost. If you're borderline, wait a few months.

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PMI Removal Timeline: When Will You Hit 80%?

Here's approximately how long it takes to reach 80% LTV through normal payments (no appreciation) on a 30-year fixed mortgage:

These timelines don't account for appreciation. In a market that's growing 3–5% per year, you could hit the equity threshold much sooner.

Speed Up PMI Removal

Make extra principal payments. Every extra dollar goes directly toward reducing your loan balance and getting you to 80% faster.

Example: On a $380,000 loan at 6.5%, adding $200/month to principal:

• Normal schedule to 80% LTV: ~9 years
• With extra $200/month: ~6.5 years
• PMI savings: approximately $4,000–$5,000

Make a lump-sum payment. If you receive a bonus, inheritance, or other windfall, apply it to principal and request PMI cancellation if it pushes you below 80%.

Home improvements that increase value. Strategic improvements can push your home's appraised value higher. Focus on high-ROI projects: kitchen updates, bathroom remodels, curb appeal.

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The PMI Removal Request Letter

Here's what to include when you write to your servicer:

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[Your Name] [Your Address] [Date]

[Servicer Name] [Servicer Address]

Re: PMI Cancellation Request Loan Number: [Your Loan Number] Property Address: [Your Property Address]

Dear Sir or Madam:

I am writing to request cancellation of private mortgage insurance (PMI) on the above-referenced loan, pursuant to the Homeowners Protection Act of 1998.

My current loan balance is $[amount], and the original value of my property at purchase was $[amount]. This represents a loan-to-value ratio of [X]%, which is at or below the 80% threshold required for PMI cancellation.

[OR, if based on current value:]

I believe my property has appreciated significantly since purchase and now has a current value of approximately $[amount], giving me a loan-to-value ratio of approximately [X]%. I request a [property valuation](/blog/cap-rate-explained-real-estate-investors) to confirm this and cancel PMI accordingly.

I confirm that:

• My payments are current
• I have no late payments in the past 12 months
• There are no subordinate liens on the property

Please advise me of any additional requirements to process this cancellation. I look forward to your response within 30 days as required by law.

Sincerely, [Your Name] [Phone Number] [Email]

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FHA Loans: Different Rules for MIP

FHA loans don't have PMI — they have MIP (Mortgage Insurance Premium). The rules are different and generally less favorable:

FHA loans originated after June 3, 2013:

• If you put less than 10% down: MIP lasts for the entire life of the loan. It never goes away. Your only option to remove it is to refinance into a conventional loan.
• If you put 10% or more down: MIP drops off after 11 years.

FHA loans originated before June 3, 2013:

• MIP can be cancelled at 78% LTV after at least 5 years of payments

The refinance path for FHA borrowers: If you have an FHA loan with lifetime MIP, the best strategy is to refinance into a conventional loan once you have 20% equity. Yes, there are closing costs — but run the numbers. If you're paying $200/month in MIP and plan to stay in the home for 5+ more years, a refinance often pays for itself within 1–2 years.

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Common PMI Mistakes

Mistake 1: Waiting for automatic removal instead of requesting it

Automatic termination happens at 78% LTV on the original schedule. If you've made extra payments or your home appreciated, you could be eligible at 80% much sooner. The difference could be months or years of unnecessary PMI payments.

Mistake 2: Not knowing about the appreciation path

Many homeowners don't realize they can remove PMI based on current home value, not just loan paydown. If your market has appreciated 15–20% since you bought, check your numbers.

Mistake 3: Forgetting about the payment history requirement

If you've had any late payments in the past 12 months, get current and wait until you have 12 clean months before requesting cancellation.

Mistake 4: Paying for an appraisal without checking numbers first

Before spending $400–$600 on an appraisal, use free tools to estimate your home's value. If you're right at the threshold, an appraiser might come in slightly lower and you'll have wasted the money.

Mistake 5: Having an FHA loan and thinking PMI rules apply

FHA's MIP and conventional PMI have completely different rules. If you're on an FHA loan, the Homeowners Protection Act doesn't apply to you.

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How Much Will You Save by Removing PMI?

Use this quick calculation:

Monthly savings = Your current PMI payment
Annual savings = Monthly savings × 12
5-year savings = Annual savings × 5

Example:

• Current PMI: $175/month
• Annual savings after removal: $2,100
• 5-year savings: $10,500

If getting an appraisal ($500) removes PMI and saves you $2,100/year, the appraisal pays for itself in less than 3 months.

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Your PMI Removal Action Plan

1. Find your current loan balance (check your mortgage statement)
2. Find your original property value (purchase price or original appraisal, whichever was lower)
3. Calculate your LTV: Loan Balance ÷ Original Value
4. If LTV ≤ 80%: Write a cancellation letter today
5. If LTV is 80%–85%: Check your home's current value using online tools and the FHFA calculator. If current LTV is below 75% (or 80% if you've owned 5+ years), request a servicer appraisal.
6. If LTV > 85%: Calculate how many months until you reach 80%. Consider making extra payments to get there faster.
7. If you have an FHA loan: Calculate whether refinancing to conventional makes financial sense.

PMI is one of the few recurring costs of homeownership that you can eliminate entirely — without moving, renovating, or changing your lifestyle. Every month you pay it unnecessarily is money you're leaving on the table. Check your numbers today.

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• [[Conventional Loan Requirements](/blog/conventional-loan-requirements) 2026: Complete Guide](/blog/conventional-loan-complete-guide)
• How to Get a 700 Credit Score: Step-by-Step Plan