When Can You Remove PMI From Your Mortgage?
Understand the definitive ways to remove Private Mortgage Insurance (PMI) from your mortgage, helping you reduce your monthly housing expenses.
Private Mortgage Insurance (PMI) protects mortgage lenders from losses if a borrower defaults. Lenders typically require PMI when a homebuyer makes a down payment of less than 20% of the property’s purchase price, indicating a higher loan risk profile.
Automatic PMI Termination
The Homeowners Protection Act (HPA) of 1998 mandates automatic PMI cancellation. Lenders must cancel PMI when the loan’s principal balance reaches 78% of the original appraised value or sales price, whichever is less. This occurs without borrower action, provided payments are current.
For loans originated on or after July 29, 1999, automatic termination also occurs at the loan’s amortization midpoint. For example, PMI terminates 15 years into a 30-year mortgage, even if the 78% loan-to-value (LTV) threshold isn’t met. “High-risk” loans may have exceptions to these standard rules.
Borrower-Initiated PMI Cancellation
The Homeowners Protection Act allows borrowers to request PMI cancellation. This can be initiated once the loan-to-value (LTV) ratio reaches 80% of the property’s original appraised value or sales price, whichever is less. This enables earlier removal than the automatic 78% threshold.
Lenders impose additional requirements for borrower-initiated cancellation. A consistent record of on-time payments is necessary, with no 30-day late payments in 12 months or 60-day late payments in 24 months. The property must not have junior liens causing the combined LTV ratio to exceed 80%. Lenders may also require a new appraisal, at the borrower’s expense, to confirm current value.
Other Pathways to PMI Removal
PMI removal isn’t only about paying down the loan; changes in property value also create opportunities. A significant increase in market value can reduce the loan-to-value (LTV) ratio for PMI removal, even without reaching principal payment thresholds. Lenders almost always require a new appraisal to verify this. Substantial home improvements enhancing property worth can also lower LTV, requiring an appraisal to validate the added value.
Private Mortgage Insurance (PMI) differs from Mortgage Insurance Premium (MIP) for FHA loans. For FHA loans originated on or after June 3, 2013, MIP is typically required for the loan’s entire life, unless the original down payment was at least 10%. In that case, MIP may be removed after 11 years. Most FHA borrowers eliminate MIP by refinancing into a conventional mortgage. Extra principal payments on a conventional loan accelerate reaching LTV thresholds for PMI cancellation.
The Process of Requesting PMI Removal
To remove PMI, contact your mortgage servicer. While federal law sets general guidelines, servicers may have specific forms or documentation requirements for cancellation requests. Inquire about these specific requirements.
Prepare any documentation the servicer requests, such as confirmation of no junior liens or a recent payment history. If PMI removal is based on increased property value or home improvements, the servicer will likely require a new appraisal to verify the updated value. The borrower is typically responsible for this appraisal cost.
Once requirements are met and documentation gathered, formally submit your request to the servicer. This can be done via a specific form, written letter, or online portal. After submission, follow up if a response isn’t received within a reasonable timeframe. The servicer will review the request and notify the homeowner of approval or denial, detailing when PMI payments will cease if approved.