How to get rid of PMI

You don’t have to pay for private mortgage insurance (PMI) forever. Once you reach 20% equity, which is the same as having a loan-to-value ratio (LTV) of 80%, you can request removal in writing. When your loan hits 78% LTV, PMI comes off automatically if you’re current on your loan. Learn more about the fastest ways to get there.

Key takeaways:

• You can request PMI cancellation once your loan balance reaches 80% of your home’s original value.
• Mortgage servicers are required by law to automatically terminate PMI when your loan balance drops to 78% of the original value.
• You can accelerate PMI removal by making extra principal payments, proving home equity growth through a new appraisal, or refinancing your loan.

What is PMI?

4 ways to get rid of PMI

You have four primary options for getting rid of PMI. The right one for you will depend on your home's value, your budget, and how long you’ve owned your property.

1. Request PMI cancellation at 20% equity

Under the Homeowners Protection Act, homeowners can ask their lender to cancel PMI once they have 20% home equity. That’s the same as paying down your loan balance to 80% of your original purchase price or original appraised value, whichever was lower at closing.

Mortgage servicers generally require you to meet the following conditions:

• Submit a written request to your mortgage servicer.
• Have a good payment history, meaning no payments 30 days late within the past 12 months and no payments 60 days late within the past 24 months.
• Certify that there are no junior liens or second mortgages on the property, such as a home equity loan.¹
• Provide proof, such as an appraisal, showing that your home’s value has not declined below its original purchase price.

2. Wait for automatic PMI cancellation

If you don’t contact your lender, your mortgage servicing company is automatically required to terminate PMI when your principal balance drops to 78% of the home's original value, as long as you’re current on your mortgage payments. Additionally, if you reach the midpoint of your loan's original amortization schedule, such as year 15 of a 30-year fixed-rate mortgage, your servicer must cancel PMI even if your balance has not yet reached 78% LTV.

3. Make extra principal payments

Making extra payments toward your loan principal can get you to 20% equity months or even years ahead of schedule. Making extra principal-only payments can reduce your total debt much faster.

4. Refinance your mortgage

If your home’s value has increased significantly since you bought it, refinancing your mortgage into a new conventional loan could eliminate PMI immediately.² If your home’s value has increased enough that your new loan has an 80% LTV, you won’t have to pay PMI on it. However, refinancing requires closing costs, which typically range between 3% and 6% of the loan amount. Make sure your PMI savings outweigh the costs of closing a new loan.

How to calculate your LTV for PMI removal

Understanding your LTV is the key to knowing when you can stop paying for PMI.

What 80% LTV means

Your LTV compares your mortgage balance with your home's value. An 80% LTV means the amount you owe is equal to 80% of the property's value. Home equity is the inverse of this, so 80% LTV means you have 20% equity.

To calculate your LTV based on the home’s original value, use this formula:

LTV = (current loan balance ÷ original home value) × 100

For example, if you purchased your home for $400,000 and your current remaining principal balance is $320,000:

($320,000 ÷ $400,000) × 100 = 80% LTV

Once your balance drops to $320,000, you have reached the 80% LTV threshold and can submit a written request to cancel PMI.

How to ask your lender to cancel PMI

Removing PMI is not automatic the moment you hit 80% LTV. You need to ask your loan servicer to cancel it.

What to include in a PMI cancellation letter

To start the process, submit a written cancellation request to your mortgage servicer. Your PMI cancellation letter should include:

• Your full legal name and current mailing address.
• Your mortgage account number and property address.
• A clear statement requesting the cancellation of PMI under the Homeowners Protection Act.
• Confirmation that your loan balance has reached 80% LTV based on the original value or that your equity has increased through home improvements or market growth.

After you’ve sent the letter, your servicer must verify that your property’s value hasn’t declined below its original value. To confirm this, servicers often require a full home appraisal or a broker’s price opinion (BPO).

Requirements for cancelling PMI

Before approving your cancellation request, your servicer will confirm:

• On-time payment record. No payments 30 days late in the last 12 months and no payments 60 days late in the last 24 months.
• Clear property title. Certification that no subordinate liens or second mortgages exist against the property.
• Property condition. Verification that the property is in good condition without major structural damage.

Can PMI be canceled if your home value increases?

If property values in your area are climbing or you have completed major renovations, your equity may have increased enough to get rid of your PMI ahead of schedule.

Home improvements vs. market appreciation

Fannie Mae and Freddie Mac servicing standards for conventional loans allow homeowners to request PMI removal based on current market value, but seasoning rules apply.

• Loan age between 2 – 5 years: Remaining balance must be 75% LTV or lower based on a new appraisal.
• Loan age over 5 years: Remaining balance must be 80% LTV or lower based on a new appraisal.

If you’ve owned your home for less than 2 years, market appreciation alone likely won’t be enough. However, major home improvements like remodeling a kitchen or finishing a basement can allow servicers to waive the 2-year seasoning requirement if an appraisal shows an LTV of 80% or lower.

How much does PMI cost?

The annual cost of PMI typically ranges from 0.3% to 1.5% of your original loan balance. Your exact rate depends on your credit score, down payment amount, and loan structure. The annual premium is divided into 12 installments and added to your monthly mortgage statement.

How much is PMI on a $400,000 house?

For a home purchased for $400,000 with a 5% down payment ($20,000), your starting loan balance is $380,000. Depending on your credit profile, your annual PMI rate might range between 0.5% and 1.5%:

• At a 0.5% PMI rate: $1,900 per year, or $158 per month.
• At a 1.0% PMI rate: $3,800 per year, or $317 per month.
• At a 1.5% PMI rate: $5,700 per year, or $475 per month.

FAQ

Here are answers to common questions about getting rid of PMI.

Does PMI go away after 20% equity?

Yes, you can submit a written cancellation request once your balance drops to 80% of the home’s original value. Servicers must automatically cancel PMI when you reach 78% LTV.

Is it a good idea to cancel PMI?

Yes, canceling PMI reduces your monthly housing payment without changing your interest rate or loan term.

Can you get rid of PMI on an FHA loan without refinancing?

FHA loans use MIP, not PMI. If you put down 10% or more, MIP ends after 11 years. If you put down less than 10%, you pay MIP for the entire loan term. To get rid of MIP in that case, you’d need to refinance FHA to conventional or another loan type.

The bottom line: Getting rid of PMI can lower your mortgage payment

Paying PMI may have helped you buy your dream home, but the extra cost doesn’t have to follow you forever. Whether you reach 20% equity through monthly payments, principal prepayments, home improvements, or rising local market values, taking steps to remove PMI directly lowers your monthly expenses. Check your latest statement, track your remaining balance, and contact your loan servicer or evaluate your refinancing options to start saving money every month.

If you're interested in seeing what you can qualify for with Rocket Mortgage, you can apply online.

¹ Home Equity Loan Product is a second standalone lien and may not be used for piggyback transactions. Valid for loan amounts between $45,000.00 and $500,000.00 (minimum loan amount for properties located in Michigan is $10,000.00). Not available on Ameriprise products. Additional restrictions, terms, and conditions apply. Must meet qualification requirements. This is not a commitment to lend.

² Refinancing may increase finance charges over the life of the loan.