How to Remove PMI Early (Save $150 to $300 Per Month)

At what point does PMI cancel automatically?

PMI cancels automatically when your loan balance reaches 78% of the original purchase price on a conventional loan. This is governed by the Homeowners Protection Act (HPA) of 1998. The 78% threshold is based on the original appraised value at purchase, not the current market value. At standard amortization, this happens after approximately 9 to 11 years on a 30-year loan depending on the interest rate. You do not need to request this cancellation; the lender is required by law to cancel PMI when the scheduled payment date reaches 78% LTV based on the original amortization schedule.

How do I request PMI cancellation before the automatic date?

Under the Homeowners Protection Act, you can request PMI cancellation when your loan balance reaches 80% of the original purchase price, which is 2 percentage points earlier than the automatic cancellation at 78%. Submit a written request to your servicer. The lender may require confirmation that you have a good payment history (no 30-day late payments in the past 12 months and no 60-day late payments in the past 24 months) and that there are no junior liens on the property. If your home value has increased, you can use current appraised value instead of original purchase price to calculate the 80% threshold, which can accelerate cancellation significantly.

Can appreciation alone remove PMI without extra payments?

Yes. If your home has appreciated enough that your current loan balance is 80% or less of the current appraised value, you can request PMI cancellation based on the new value. You will need to order a new appraisal (typically $400 to $700) at your expense. The servicer's rules determine whether they accept this method, and some servicers require a minimum of 2 years of ownership before considering current-value cancellation requests. In a market with 4% to 5% annual appreciation, this method can remove PMI 3 to 5 years earlier than scheduled amortization alone.

Does making extra principal payments speed up PMI cancellation?

Yes. Extra principal payments reduce your loan balance faster, moving your LTV toward 80% ahead of schedule. On a $320,000 loan at 6.75%, standard amortization reaches 80% of the original $400,000 purchase price ($320,000 LTV) approximately at the starting point (80% is the exact starting LTV with 20% down, so this only applies to lower down payment scenarios). For a buyer who put 5% down with a $380,000 loan on a $400,000 home, the 80% threshold is $320,000. Each extra $100 per month in principal payment accelerates the schedule by approximately 3 to 4 months depending on the rate and remaining balance.

What is the difference between canceling PMI versus refinancing out of it?

Requesting PMI cancellation with your current lender involves no new loan, no closing costs, and no change to your rate or term. You simply stop paying PMI once the 80% threshold is reached. Refinancing removes PMI by replacing your loan with a new one at a new rate; this typically costs 1.5% to 2.5% of the loan amount in closing costs but also changes your interest rate. Refinancing makes sense when current rates are lower than your original rate, when your credit score has improved enough to qualify for better pricing, or when your loan is FHA (where MIP cannot be canceled via a servicer request and refinancing to conventional is the only exit strategy).

Does PMI cancellation work differently for FHA loans?

Yes. FHA mortgage insurance premium (MIP) does not cancel based on LTV for most borrowers. FHA loans with less than 10% down originated after June 3, 2013, carry MIP for the entire loan term. The only way to eliminate MIP on these loans is to refinance to a conventional loan. FHA loans with 10% or more down have MIP that cancels after 11 years. This permanent MIP is a significant long-term cost disadvantage of FHA versus conventional loans for borrowers who plan to hold the loan more than 10 years.