Many owners who put less than 20% down on a conventional loan pay private mortgage insurance every month. Plenty don't know they can cancel it, or when. It often costs $85 to $250 a month for each $200,000 borrowed. Dropping it could save you that each month. Your statement shows your own figure.
What PMI actually is
Private mortgage insurance protects your lender, not you, if you stop paying. Lenders require it when you put down less than 20%. To them, a smaller down payment means more risk.
PMI shows up as its own line on your bill each month. It does nothing for you. It is there to cut your lender's risk, until you own enough of the home. Can you deduct it on your taxes? That depends on the tax year and your income, so ask a tax pro.
The 20% equity rule
The key number is loan-to-value ratio (LTV)What you owe as a percentage of what the home is worth.Click to open the full glossary.. When what you owe drops to 80% of the home's original value, federal law lets you ask to cancel PMI. Original value is usually what you paid. You must ask in writing, be current, and have a good payment record.
Your LTV changes in two ways: you pay down principal each month via amortizationThe schedule that splits each payment between principal and interest.Click to open the full glossary., and your home's value can change. In a strong market both can help, but rising value only counts if your servicer agrees to use it.
If you bought for $380,000, your 80% mark is $304,000. Say your home is now worth $430,000. Your servicer may agree to use that value, after a new appraisal. Many then want 75% or less ($322,500) on a loan two to five years old, or 80% ($344,000) after that. Ask yours what its rules are.
Your rights under federal law
The Homeowners Protection Act (HPA) of 1998 gives you specific rights on conventional loans:
- Request cancellation when you hit 80%, based on the home's original value. Ask in writing. You must be current, with a clean year or two behind you. Your servicer may also want proof the value has not dropped.
- Automatic termination at 78%, based on your first payoff plan. At that point the law says your servicer must stop it, even if you never ask, as long as you are current on payments.
- Final termination at the midpoint of your loan term as a backstop, whatever your LTV, if you are current on payments.
"By law, PMI must end on its own once your original payment schedule reaches 78%, if you are current on payments. You never have to ask."
How to request early cancellation
- Check your current LTV. Take what you owe. Divide it by your home's original value. Is it 0.80 or less? Then you can likely ask. Using today's value instead? Your servicer's own rules apply.
- Submit a written request to your servicer. Many take these on their web site. Always get it in writing.
- Order an appraisalA professional opinion of what your home is worth.Click to open the full glossary. if relying on appreciation. If you are counting on market gains, your servicer will typically want an appraisal ($400–$600). Many also want 75% or less on a loan under five years old. Paydown-only cancellation often needs just a servicer review.
- Confirm your payment history is clean. Most lenders want a year or two of payments on time. And no late ones in the last year.
- Track the confirmation. Once approved, PMI should come off your bill within about 30 days. Check your next statement to be sure.
Enter your loan balance and original home value in our free PMI removal calculator to estimate your 80% and 78% dates in seconds. No signup required.
FHA loans: the rules are stricter
If your loan is FHA-backed, you have a mortgage insurance premium (MIP), not PMI, and the rules differ significantly. FHA loans originated after June 2013 with less than 10% down carry MIP for the life of the loan. Refinancing into a conventional loan is usually the only way out. That may be worth a look once you have 20% equity and rates are close to yours.
Check your closing documents, or call your lender. You need to know whether you have a conventional loan or an FHA loan. If it is FHA, you put down less than 10%, and it closed after June 2013, then reaching 20% equity will not end the charge. Refinancing into a conventional loan is usually the only way out.
How to build equity faster
Not quite at 80% LTV yet? Two levers to pull:
- Extra principal payments. Even $100–$200/month applied to principal can bring the date you can ask for removal months or years closer. The automatic 78% date stays put. When paying, explicitly designate it as "additional principal," since not all servicers apply overpayments to principal by default.
- Request a new appraisal. Has your market gone up since you bought? A fresh appraisal may help, if your servicer will use today's value. At $85 to $250 a month in PMI, a $400 to $600 appraisal could pay for itself in two to seven months, but only if your servicer agrees to drop PMI.
Doing this by hand means finding your statement and doing the math again and again. Your free dashboard does that math from the numbers you enter. With Pro, our daily check emails you as you get close to 80%.
Know when you can ask to cancel PMI
Your free CasaCrow dashboard estimates the month you reach 80%. With Pro, our daily check emails you as you get close.
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