How to cancel PMI and save thousands

Most homeowners who bought with less than 20% down are paying private mortgage insurance every single month, and many don't realize they can cancel it, or when. The savings are real: often $100–$250 a month, year after year.

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. You cannot write it off on your tax. And it does nothing for you. It is there to cut your lender risk, until you own enough of the home.

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 value, you hold 20% equity. At that point federal law lets you request that PMI be canceled.

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 goes up in worth. In a strong market, both work for you at once.

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 what you paid for the home. You must be up to date, with a clean year or two behind you.
• Automatic termination at 78%, based on your first payoff plan. At that point the law says your lender must stop it, even if you never ask.
• Final termination at the midpoint of your loan term as a backstop, regardless of LTV.

How to request early cancellation

1. Check your current LTV. Take what you owe. Split it by what your home is worth. Is it 0.80 or less? Then you can likely ask.
2. Submit a written request to your lender. Most take these on their web site. Always get it in writing.
3. Order an appraisalA professional opinion of what your home is worth.Click to open the full glossary. if relying on appreciation. If market gains are what got you to 80%, your lender will typically require a certified appraisal ($400–$600). Paydown-only cancellation often requires just a servicer review.
4. 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.
5. Track the confirmation. Once approved, PMI removal must take effect the following billing cycle.

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. The only way out is to refinance into a conventional loan. That tends to pay off once you have 20% equity and rates are close to yours.

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 shave months or years off your PMI timeline. When paying, explicitly designate it as "additional principal," since not all servicers apply overpayments to principal by default.
• Request a new appraisal. If your market has appreciated since you bought, a fresh appraisal may show you already qualify. The $400–$600 fee pays for itself in the first month of PMI savings if it gets you over the line.

Doing this by hand means finding your last bill. Then estimating what your home is worth. Then doing the math, four times a year. We track it for you every day. And we email you the month you can request cancellation.