Private mortgage insurance protects your lender against your default. You pay for it; you receive nothing from it. On a $400,000 loan it typically runs $100 to $500 a month, and every one of those dollars buys down precisely none of your balance. What the guide on how PMI works covers conceptually, this page covers procedurally: how you actually make it stop.
The good news is that PMI is temporary by federal statute rather than by your servicer's goodwill. The Homeowners Protection Act of 1998 gives you rights that a servicer cannot contract away. The bad news is that the most valuable of those rights is the one that requires you to act.
The three rights, and when each one bites
1. Borrower-requested cancellation at 80%. Once the principal balance reaches 80% of the home's original value — the lesser of the purchase price or the original appraisal — you may request cancellation in writing. Crucially, you may base this on the actual unpaid balance, not merely the scheduled one.
2. Automatic termination at 78%. The servicer must terminate PMI when the balance is scheduled to reach 78% of original value, provided you are current. You do not have to ask. Read the next section before relying on this.
3. Final termination at the midpoint. If neither of the above has happened, PMI must end the month after you reach the midpoint of the amortization period — year 15 of a 30-year loan — regardless of your loan-to-value ratio, provided you are current. This is a backstop that mainly catches loans with interest-only periods or negative amortization. If you are relying on it, something has gone wrong.
The rule that punishes people who pay extra
This is the part almost every article on PMI gets wrong, and it costs real money.
Automatic termination at 78% is calculated from the initial amortization schedule, irrespective of your current unpaid principal balance. That is the statutory language and it is not a formality.
Work through what that means. You have been diligently overpaying your mortgage. Your actual balance crossed 78% of the original value two and a half years ago. Your servicer knows this. And your servicer will keep charging you PMI right up until the date the original schedule said you would reach 78% — which, because you have been overpaying, is years away.
Every extra dollar you sent bought you nothing at all in PMI terms. Not because anyone cheated you, but because you were waiting for the automatic right when you should have been exercising the requested one.
What “good payment history” means
The servicer may require a good payment history before granting a requested cancellation, and the term has a specific meaning:
- No payment 60 or more days past due in the last 24 months; and
- No payment 30 or more days past due in the last 12 months.
You must also be current at the time of the request. If you are not, fix that first — a request submitted while delinquent will simply be refused.
What your servicer is allowed to demand
Three things, and knowing the list stops you being talked into a fourth:
- Evidence the property has not declined in value. They may require a broker price opinion or a full appraisal, at your expense — typically $500 to $800. If PMI is costing you $250 a month, that pays for itself inside three months.
- Certification that no subordinate liens exist. A home equity line or second mortgage will block cancellation, because it changes the lender's position. If you have a HELOC with a zero balance, ask whether closing it would clear the obstacle.
- Good payment history, as defined above.
What they may not do is invent thresholds above the statutory ones, or refuse to give you their requirements in writing. If a representative starts describing a rule you have never heard of, ask them to send it to you in writing and to identify the investor guideline it comes from.
The appreciation route
The statutory rights above all measure against the original value. But if your local market has risen, your real equity may already be well past 20% even though the statutory clock says otherwise.
Removal on the basis of the home's current value is not a federal right — it is an investor programme, and the rules come from Fannie Mae or Freddie Mac rather than from Congress. Typical conditions:
- A seasoning period, commonly two years from origination.
- A higher equity bar in the early years — frequently 25% equity if the loan is between two and five years old, dropping to 20% after five years.
- A new appraisal from a valuer the servicer selects, which you pay for.
Because it is a servicer/investor programme rather than a statutory right, the details vary and you must ask for them specifically. It is very often worth it: a few hundred dollars of appraisal to kill a few thousand dollars a year of premium is one of the better returns available to a homeowner.
The request, step by step
- Establish your numbers. Find the original value (purchase price or original appraisal, whichever is lower) from your closing documents. Find your current balance from your latest statement. Divide the second by the first.
- Write, do not phone. Phone first if you like, to get their requirements, but submit the request in writing so there is a record with a date on it. Say plainly: “I am requesting cancellation of borrower-paid private mortgage insurance under the Homeowners Protection Act. My current principal balance is $X. The original value of the property was $Y. This is a loan-to-value ratio of Z%.”
- Ask for the requirements in writing before you spend anything on an appraisal. Get the valuation firm, the equity threshold, and the fee confirmed.
- Diarise it. If your servicer takes more than 30 days to respond, follow up in writing referencing your original request date.
- Verify. When PMI is cancelled, check the next statement. The premium line should be gone and your payment should have fallen. Servicers do make errors here.
If they stall or refuse
A denial must be explained. If your request is refused, the servicer must provide written notice within 30 days setting out the reason. Get that in writing, then compare it against the statute.
If PMI was cancelled or terminated late, you may be owed a refund of premiums collected after the date it should have ended — unearned premiums must be returned. If you cannot resolve it with the servicer, complaints go to the Consumer Financial Protection Bureau, and they are effective more often than people expect.
Where none of this applies
Three important exclusions, and people lose a lot of time to them:
- FHA loans. The Homeowners Protection Act does not cover mortgage insurance issued under the National Housing Act. FHA loans carry MIP under their own rules, and where the original loan-to-value exceeded 90%, the annual premium generally lasts the life of the loan. There is no cancellation request to make. The only exit is refinancing into a conventional loan — which, once you have 20% equity, is very often worth doing on that basis alone.
- VA loans. No monthly mortgage insurance at all; there is a one-off funding fee instead. Nothing to cancel.
- Lender-paid PMI (LPMI). The premium was buried in a permanently higher interest rate rather than charged as a line item. There is no PMI to cancel because officially there is none. It ends only when the loan is refinanced or paid off. If you were sold “no PMI” with a rate that seemed a shade high, check whether this is what you have.
Frequently asked questions
Do extra mortgage payments get rid of PMI faster?
Only if you request cancellation. Extra payments bring your actual balance to 80% of the original value sooner, and a borrower-requested cancellation may be based on that actual balance. But automatic termination at 78% is calculated from the original amortization schedule and ignores your extra payments entirely. Prepay and then wait, and you waste the benefit.
When can I request PMI cancellation?
When your principal balance reaches 80% of the home's original value — the lesser of the purchase price or the original appraisal. Submit the request in writing. You will need a good payment history and may be asked to pay for an appraisal showing the property has not lost value.
Can I remove PMI because my home went up in value?
Often, yes — but it is a servicer and investor programme, not a federal right. Expect a seasoning period of about two years, a requirement of roughly 25% equity if the loan is under five years old, and a new appraisal at your expense. Ask your servicer for their specific rules in writing.
Can I cancel FHA mortgage insurance?
Generally not. FHA loans fall outside the Homeowners Protection Act, and where the original loan-to-value was above 90%, the annual MIP lasts the life of the loan. The practical exit is to refinance into a conventional loan once you hold 20% equity.
What if my servicer refuses to cancel PMI?
They must give you a written explanation within 30 days. Get it, and check it against the statute. If PMI ran past the date it should have ended, you may be owed a refund of the unearned premiums. Unresolved disputes can be taken to the Consumer Financial Protection Bureau.
Does a second mortgage or HELOC stop me cancelling PMI?
It can. Servicers are entitled to require that no subordinate liens exist. Even an undrawn home equity line may block cancellation, so ask whether closing it would clear the path before you pay for an appraisal.
Mortgage Ledger publishes educational information, not personalized financial, legal, tax, lending, or investment advice. The figures here are estimates built on stated assumptions and will not match a lender’s underwriting exactly. Confirm any number that matters against your Loan Estimate and a licensed professional before you act on it.