When to Remove PMI From Your Mortgage

Private Mortgage Insurance (PMI) is often required for conventional mortgages with a down payment less than 20% of the home’s purchase price. This insurance protects the mortgage lender, not the homeowner, against financial loss if the borrower defaults on the loan. PMI adds an extra cost to monthly mortgage payments, which homeowners typically seek to remove to reduce their financial burden and free up funds for other goals.

Automatic Removal Triggers

Federal law, specifically the Homeowners Protection Act (HPA) of 1998, mandates the automatic termination of Private Mortgage Insurance under certain conditions. The HPA applies to most conventional mortgage loans originated after July 29, 1999.

One trigger for automatic PMI removal occurs when the principal balance of the mortgage is scheduled to reach 78% of the home’s original value. The “original value” is the lesser of the sales price or appraised value at loan origination. This termination happens automatically on the amortization schedule, requiring no action from the homeowner, provided payments are current.

Another automatic termination point is the midpoint of the loan’s amortization schedule. For example, on a 30-year mortgage, this is after 15 years. This applies even if the 78% LTV threshold is not met, as long as the borrower is current on payments. The lender is responsible for notifying the borrower when PMI is scheduled to terminate or has been terminated.

Borrower-Initiated Removal Requirements

Homeowners can proactively request PMI cancellation before automatic termination points. This borrower-initiated removal is possible once the loan-to-value (LTV) ratio reaches 80% of the home’s value. Unlike automatic termination, this calculation can consider the current appraised value, which may have appreciated.

To qualify, a homeowner must demonstrate a good payment history, generally meaning no 30-day late payments in the last 12 months and no 60-day late payments in the last 24 months.

The property must not have any subordinate liens, such as a second mortgage or a home equity line of credit. The property’s value must also not have declined below its original value, as a decrease could prevent approval.

Steps for Requesting PMI Removal

Once a homeowner believes they meet the criteria for borrower-initiated PMI removal, they should formally request cancellation from their loan servicer. Contact the servicer to inquire about their specific procedures and required documentation. Many servicers require a written request or a specific form.

The servicer will likely require documentation to verify eligibility, including evidence of consistent payment history. If the request is based on an increase in the home’s value due to market appreciation or improvements, an updated property appraisal will often be necessary. The homeowner typically bears the cost of this appraisal, and the servicer may have approved appraisers or specific methods.

After receiving the request and all necessary documentation, the lender reviews the information to confirm the loan-to-value ratio and payment history criteria are met. The approval timeline varies, but homeowners can generally expect a response within a few weeks to a couple of months. Upon approval, PMI will be removed, reducing the monthly payment. Any unearned PMI premiums may also be refunded within 45 days after cancellation.