When Can You Get PMI Removed From Your Mortgage?

When a homebuyer obtains a conventional mortgage loan with a down payment less than 20% of the property’s purchase price, the lender requires Private Mortgage Insurance (PMI). This insurance protects the mortgage lender, not the borrower, against potential losses if the borrower defaults on the loan. PMI allows individuals to purchase a home with a smaller upfront investment, thereby expanding access to homeownership.

Automatic PMI Termination

Federal law establishes clear guidelines for automatic PMI termination. Lenders must automatically cancel PMI when the loan balance reaches 78% of the property’s original value. The original value is the lesser of the sales price or the appraised value at loan origination. This occurs without borrower action, provided the loan is current.

A “midpoint” rule also applies for automatic PMI termination. If PMI has not been canceled earlier, lenders must terminate it by the first day of the month following the midpoint of the loan’s amortization schedule. For a 30-year mortgage, for example, this point would be after 15 years. This termination also requires the borrower to be current on payments. Should the loan not be current on the scheduled termination date, PMI will be terminated on the first day of the month after the borrower becomes current.

Borrower-Initiated PMI Cancellation

Borrowers can request PMI cancellation once their loan balance reaches 80% of the home’s original value. This original value is typically the lesser of the sales price or the appraised value at the time of purchase. For a refinance, the original value is the appraised value at the time of refinancing. This allows borrowers to remove PMI earlier by making additional payments to reduce their balance.

Several conditions must be met for borrower-initiated cancellation. The borrower must have a good payment history, meaning no payments 30 days or more late in the past 12 months and no payments 60 days or more late in the past 24 months. The property’s value should not have declined below its original value, and the borrower may need to provide evidence, such as an appraisal, to confirm this. No subordinate liens, such as a second mortgage or home equity line of credit, should be on the property.

If the home’s market value has significantly increased since loan origination, borrowers may request PMI cancellation sooner. This approach relies on the current, higher appraised value of the home, which can lower the loan-to-value (LTV) ratio faster. Lenders may require a new appraisal to verify this value, and the cost is typically the borrower’s responsibility. If the new appraisal demonstrates that the loan balance is 80% or less of the current value, and other conditions are met, the lender may agree to cancel PMI.

The PMI Cancellation Process

Once a borrower meets PMI cancellation criteria, the next step is initiating a formal request with their loan servicer. The servicer is the entity responsible for collecting mortgage payments and managing the loan. Borrowers should contact their servicer to understand specific cancellation procedures and obtain any required forms.

A written request is necessary to begin the cancellation process. If the cancellation is based on an increased property value, the servicer may require an updated appraisal to confirm the home’s current market value. The servicer often has specific requirements for who conducts the appraisal, so borrowers should not independently order one without consulting their servicer first.

Upon receiving the request and any necessary documentation, the servicer will review the borrower’s eligibility, including payment history and the property’s LTV. Processing time can vary, but servicers are required to respond within a reasonable timeframe. If the request is approved, PMI payments will cease, and any unearned premiums may be returned. Should the request be denied, the servicer must provide a written explanation detailing the reasons for the denial.

Mortgage Insurance for FHA Loans

Mortgage insurance for Federal Housing Administration (FHA) loans differs from conventional PMI. FHA loans require a Mortgage Insurance Premium (MIP), including an Upfront Mortgage Insurance Premium (UFMIP) paid at closing and an Annual Mortgage Insurance Premium (Annual MIP) paid monthly. Unlike conventional PMI, FHA MIP is required regardless of the down payment amount.

FHA MIP payment duration depends on loan origination date and initial loan-to-value (LTV) ratio. For FHA loans originated on or after June 3, 2013, if the initial down payment was less than 10%, the Annual MIP is required for the loan’s entire life. This means it will continue for the full term of the mortgage unless the borrower refinances into a different loan type.

However, for FHA loans originated on or after June 3, 2013, if the initial down payment was 10% or more, the Annual MIP can be removed after 11 years. For FHA loans originated before June 3, 2013, MIP rules often allowed cancellation at a 78% LTV ratio, similar to conventional PMI. Borrowers with FHA loans often consider refinancing into a conventional loan once they build sufficient equity to eliminate the MIP requirement.