Every month, you may be paying a few hundred dollars for an insurance policy that protects someone else. Private mortgage insurance (PMI) covers your lender — not you — against the risk that you default, and on a conventional loan with less than 20 percent down, it typically costs 0.46 to 1.50 percent of the loan amount per year, according to the Urban Institute's Housing Finance Policy Center. On a $400,000 loan, that is roughly $150 to $500 a month — for coverage you will never personally benefit from. The good news: federal law gives you not one but two exits, and many homeowners walk past the first one for years without realizing it.
This guide explains exactly when you can cancel PMI, when your servicer must drop it automatically, the conditions that can block you, and why FHA borrowers face a completely different set of rules.
PMI in 60 Seconds: What You Are Paying For
When you put less than 20 percent down on a conventional mortgage, your lender usually requires PMI. It is arranged by the lender, provided by a private insurer, and billed to you — most often as a line item inside your monthly mortgage payment. Your cost depends mostly on your credit score and your loan-to-value (LTV) ratio: the lower your score and the smaller your down payment, the higher the premium.
Two things PMI is not:
- It is not homeowners insurance. That protects your property against fire, storms, and liability claims. PMI protects only the lender's position in your loan.
- It is not permanent — on a conventional loan. Unlike some government-backed programs, conventional PMI has a legally mandated end date. Knowing the rules is the difference between paying it for three years and paying it for ten.
Your Two Federal Rights Under the Homeowners Protection Act
Before 1998, lenders had no obligation to tell you when your PMI could come off, and many borrowers kept paying long after crossing 20 percent equity. Congress answered with the Homeowners Protection Act of 1998 (HPA), which covers most conventional, conforming mortgages on a primary residence closed on or after July 29, 1999. It gives you two separate rights.
One definition matters for both: "original value" means the lesser of your contract purchase price and the appraised value at closing — not what your home is worth today. All the percentages below run against that frozen number unless you specifically ask your servicer to consider current market value, which is a different process with stricter rules (more on that below).
Right 1: Borrower-requested cancellation at 80 percent
You have the right to ask your servicer, in writing, to cancel PMI on the date your principal balance is first scheduled to reach 80 percent of the original value — the point where you hold 20 percent equity. Your PMI disclosure form from closing should state that date, and your servicer must remind you of your cancellation rights every year.
To get cancellation, you generally must show all of the following:
- You are current on your mortgage. No payment 30 or more days late in the prior 12 months, and none 60 or more days late in the prior 24 months.
- No subordinate liens. A home equity loan or HELOC on the property can block cancellation until it is paid off or the combined loan-to-value meets the servicer's threshold.
- The property value has not declined. The servicer can require evidence — often a broker price opinion or appraisal at your expense — that the home is still worth at least its original value.
- A written request. Cancellation is never automatic at 80 percent. If you never ask, you keep paying until the next threshold.
Right 2: Automatic termination at 78 percent
If you do nothing, your servicer must automatically terminate PMI on the date your balance is first scheduled to hit 78 percent of original value under your original amortization schedule — provided you are current on that date. No request, no appraisal, no action from you.
Two important qualifiers:
- "Scheduled" is doing real work. The 78 percent date is computed from your original payment schedule, not your actual balance. Extra principal payments get you to 78 percent of the balance sooner in real life, but automatic termination still happens on the scheduled date — which is why requesting early cancellation at 80 percent, rather than waiting, usually saves more.
- High-risk loans are exempt from 78 percent auto-termination. For loans the HPA classifies as high-risk, the servicer is not required to terminate at 78 percent — but the final backstop below still applies, and you can still request cancellation at 80 percent.
The backstop: termination at the loan's midpoint
If PMI is somehow still in force at the midpoint of your amortization period — year 15 of a 30-year loan, for example — the servicer must terminate it then, as long as you are current. This catches edge cases: high-risk loans, borrowers who fell behind and cured, and loans that predate the law's other protections.
What the HPA does not cover
- FHA and VA loans. These have their own mortgage insurance regimes (see the FHA section below). VA loans have no monthly mortgage insurance at all — just an upfront funding fee.
- Lender-paid mortgage insurance (LPMI). If your lender paid the premium in exchange for a slightly higher rate, there is nothing to cancel: your "PMI" is baked into the rate itself. Refinancing is the only way out.
- Loans closed before July 29, 1999. The law's cancellation and termination rights do not apply, though your loan contract or state law may grant similar rights — your servicer is required to tell you about them. Otherwise, you remove PMI the old-fashioned way: ask, and document 20 percent equity.
How to Request Cancellation: A Step-by-Step Playbook
Knowing the 80 percent rule is step zero. Here is how to actually execute it.
1. Find your trigger date and your numbers. Pull your original PMI disclosure from your closing packet (it names the scheduled 80 percent date) or call your servicer and ask for it — servicers must maintain a phone number specifically for PMI questions. Divide your current principal balance by your home's original value. At 0.80 or below, you can ask.
2. Check your payment history first. Pull 12 months of statements. A single 30-day late payment in the last year is the most common reason servicers deny cancellation, and it is also the easiest to fix with patience: wait until the late payment ages out, then reapply.
3. Ask about investor overlays before you pay for an appraisal. Your servicer answers to the investor that owns your loan (often Fannie Mae or Freddie Mac), and investors add seasoning rules when cancellation is based on your home's current appraised value rather than scheduled paydown. A typical overlay requires 75 percent LTV if you have owned the home two to five years, relaxing to 80 percent after five years, plus two years of ownership before a value-based request is even considered. If you are requesting on scheduled-balance grounds at 80 percent of original value, the standard HPA test applies — but confirm which track you are on, because a $300 to $600 appraisal ordered for the wrong track is money wasted.
4. Put the request in writing. Call to learn the servicer's exact process, then follow it to the letter — most require a written request plus evidence of value (an appraisal or broker price opinion they order, usually at your cost) and a certification that you have no subordinate liens. Keep copies of everything with dates.
5. Verify the drop on your next statement. PMI should disappear from the payment breakdown the month after approval. Servicers have been penalized for dragging their feet on valid cancellations, so if months pass with no change, escalate in writing — and know that the Consumer Financial Protection Bureau takes complaints about PMI cancellation failures.
Four Faster Ways Out
Waiting for the amortization schedule is the slowest path. These move the date up:
Make extra principal payments. Every additional dollar of principal pulls your real balance toward 80 percent faster — at which point you request cancellation rather than waiting for 78 percent auto-termination. Run your amortization table to see how a modest monthly add-on shifts the date; the PMI savings stack on top of the interest savings.
Request a value-based cancellation after appreciation or improvements. If your market has risen or a renovation added real value, a new appraisal showing 80 percent LTV against current value can end PMI years early. Mind the seasoning overlays above, and be realistic about appraisal math: on a $400,000 purchase with 10 percent down, you need the home to appraise at $450,000 to hit 80 percent on a $360,000 balance.
Refinance into a new loan at 80 percent LTV or below. A refinance replaces your loan entirely, so PMI simply does not exist on the new one if you have 20 percent equity. This is the right move when rates have fallen since you bought or when appreciation alone got you across the line — but compare total costs, not just the monthly payment: 2 to 5 percent in closing costs can take years to earn back through PMI savings alone.
Remove a blocking second lien. If a HELOC or home equity loan is the only thing standing between you and cancellation, paying it down or closing it can be the cheapest "PMI removal" available.
One thing that does not remove PMI by itself: a loan recast (re-amortization). Recasting lowers your payment after a lump sum, but most servicers keep PMI in place — you still need to request cancellation under the standard rules.
Why FHA Loans Play by Different Rules
If you have an FHA loan, almost nothing above applies. FHA mortgage insurance is called MIP (mortgage insurance premium), it is governed by HUD rules rather than the HPA, and the exit doors are narrower:
- Loans endorsed on or after June 3, 2013, with less than 10 percent down: MIP lasts for the life of the loan. There is no 80 percent request right and no 78 percent auto-drop. The only ways out are paying the loan off or refinancing into a non-FHA loan.
- Same-era loans with 10 percent or more down: MIP cancels after 11 years. Not at a balance threshold — on a clock.
- Loans endorsed before June 3, 2013: MIP cancels at 78 percent LTV, similar in spirit to conventional auto-termination.
FHA insurance also has two parts: an upfront premium of 1.75 percent of the loan (usually rolled into the balance) plus an annual premium — 0.15 to 0.75 percent depending on loan size and term, with most borrowers paying 0.55 percent — billed monthly. That stacked cost is why refinancing out of FHA into a conventional loan is one of the highest-return moves an FHA borrower with 20 percent equity can make: you shed the monthly MIP entirely, and if your credit has improved since purchase, you may land a better rate too. Just confirm the new loan's rate and closing costs justify the switch, and remember that refinancing restarts your amortization clock unless you choose a shorter term.
Mistakes That Keep PMI Alive Longer Than It Should
- Assuming it drops automatically at 80 percent. It does not. Eighty percent is a right you must exercise in writing; only 78 percent is automatic.
- Ignoring the annual PMI disclosure. Your servicer must remind you yearly of your cancellation rights. Treat that notice as a prompt to re-run your LTV math.
- Letting a small late payment linger in the window. One 30-day late in 12 months can sink a request. Set up autopay for at least the minimum if your history is otherwise clean.
- Ordering an appraisal before asking which track you qualify for. Scheduled-balance cancellation and current-value cancellation have different evidence rules and different LTV thresholds under investor overlays.
- Forgetting subordinate liens. Open a HELOC after purchase and it may block cancellation until the combined LTV satisfies your servicer.
- Sitting on a post-2013 FHA loan with 20 percent equity. Every month you wait is a month of MIP that no law will ever refund. Price a conventional refinance now.
Track PMI Like the Line Item It Is
PMI hides inside your mortgage payment, which is exactly why it overstays its welcome — out of sight, out of mind, still billing. Break it out as its own line in your books the way you would any subscription: amount per month, the balance or date at which it ends, and the cumulative total you will have paid by then. That single habit does three things at once: it quantifies what early cancellation is worth, it gives you a scheduled trigger to re-check your LTV every few months, and it lets you verify — statement by statement — that the servicer actually dropped the charge when required. If you track spending in plain-text accounting, a monthly posting to an expense account like Expenses:Housing:MortgageInsurance makes the running total trivially visible, and your dashboard shows the month the line finally goes to zero.
Keep Your Housing Costs Organized From Day One
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