How Can I Remove PMI From My Mortgage?

Private Mortgage Insurance (PMI) is an insurance policy designed to protect the mortgage lender, not the borrower, in the event a homeowner defaults on their loan. This coverage is required for conventional loans when a borrower makes a down payment of less than 20% of the home’s purchase price. PMI is an additional expense that increases the borrower’s monthly mortgage payment. While it allows individuals to purchase a home with a smaller upfront investment, it represents an ongoing cost until specific conditions are met for its removal.

Eligibility for PMI Removal

Homeowners can remove Private Mortgage Insurance through automatic termination or by initiating a cancellation request. The Homeowners Protection Act (HPA) of 1998 establishes federal guidelines for PMI termination on conventional loans for primary residences.

Automatic PMI termination occurs when the mortgage loan’s principal balance is scheduled to reach 78% of the home’s original value. This original value is generally the lesser of the contract sales price or the appraised value at the time of purchase. For this automatic termination to take effect, the borrower must be current on their mortgage payments. If the loan balance has not reached 78% LTV earlier, PMI must also be terminated by the first day of the month following the midpoint of the loan’s amortization period, provided the borrower is current on payments.

Borrowers can proactively request PMI cancellation earlier than automatic termination once their loan balance reaches 80% of the home’s original value. This request can be made if the 80% loan-to-value (LTV) threshold is reached either through scheduled payments or through additional principal payments.

Payment history is a requirement for borrower-initiated cancellation. Most lenders require no 30-day late payments in the past 12 months and no 60-day late payments in the past 24 months. The loan must also be current at the time of the cancellation request.

Lenders require a certification that the property has no subordinate liens, such as a second mortgage or a Home Equity Line of Credit (HELOC). If such liens exist, they may need to be paid off or restructured before PMI can be removed.

If the request for PMI removal is based on an increase in the home’s market value, a new professional appraisal is required. This appraisal determines the current market value of the property, which is then used to calculate the updated LTV ratio. The homeowner is responsible for the cost of this appraisal.

Some lenders also impose loan “seasoning” requirements for requests based on increased home value. This means the mortgage must have been in place for a certain period before a value-based cancellation can be considered.

Steps to Request PMI Cancellation

Once eligibility for PMI removal is determined, the next step involves formally requesting cancellation from the mortgage servicer. The process begins by contacting the servicer, which can often be done via phone, online portal, or by sending a written letter. A written request is recommended for documentation and record-keeping purposes.

The formal request should be comprehensive, including the loan number, property address, and a clear statement indicating the desire to cancel PMI. It is beneficial to reference the specific eligibility criteria that have been met, such as reaching the 80% LTV threshold or satisfying payment history requirements.

If a new appraisal is necessary to demonstrate increased home value, the mortgage servicer will typically arrange for it. The borrower pays the appraisal fee directly to the appraiser. Once the appraisal report is submitted, the servicer will review it to confirm the updated market value and calculate the new loan-to-value ratio.

The servicer will then initiate a review process to verify all stated eligibility criteria. This includes checking the borrower’s payment history to confirm no recent late payments, calculating the LTV ratio, and confirming the absence of subordinate liens.

After completing their review, the servicer will notify the borrower of their decision, whether approval or denial. This notification typically outlines the reasons for the decision, and if denied, it may specify what conditions still need to be met. If the request is approved, PMI will be removed from future mortgage payments, and this change will be reflected on subsequent mortgage statements.

Other Ways to Eliminate PMI

Beyond the direct cancellation process, homeowners have alternative strategies to eliminate Private Mortgage Insurance. One method is refinancing the mortgage loan. By obtaining a new mortgage, PMI can be avoided if the new loan’s loan-to-value (LTV) ratio is 80% or less, based on the new loan’s appraised value. This approach involves a new loan application, credit checks, and can incur closing costs.

Refinancing can also lead to changes in the interest rate and loan term, potentially offering a lower rate or a shorter payoff period. Evaluating the costs and benefits of refinancing, including a new appraisal, is important to ensure it aligns with financial goals.

Another strategy is making accelerated principal payments on the existing mortgage. Consistently paying more than the minimum required monthly payment directly reduces the loan’s principal balance, which in turn accelerates equity buildup. This helps reach the 80% LTV threshold sooner, allowing for an earlier request for PMI cancellation.

Borrowers can implement this by adding a small, consistent amount to each monthly payment, making one extra full payment annually, or applying lump-sum payments from bonuses or tax refunds directly to the principal.