PMI Removal
how to drop it, legally, on schedule.

What PMI Actually Costs

Private mortgage insurance protects the lender — not you — when your loan-to-value (LTV) is above 80%. On a conforming conventional loan, PMI runs 0.3% to 1.5% of the loan balance per year, tiered by FICO and LTV. On a $360,000 loan that's $90 to $450 per month. Over the typical 5–8 years it takes to pay PMI down to the cancellation threshold, that's $5,000 to $30,000 — money you can recapture by triggering one of the four removal paths below.

Path 1: Automatic Termination at 78% LTV

The HPA requires lenders to automatically terminate PMI on the date your loan balance is scheduled to reach 78% of the original purchase price — based on the original amortization schedule, not actual home appreciation. You don't have to do anything. The catch: "scheduled" means the lender uses the amortization table from day one, ignoring any extra principal you paid. So if you've been making extra payments, automatic termination still happens on the original schedule date.

Use the mortgage calculator to see the exact month your balance reaches 78% of original price. The calculator outputs a "PMI ends" line that uses the HPA rule.

Path 2: Borrower Request at 80% LTV

You can request PMI removal once the balance hits 80% of the original purchase price. This is faster than automatic termination — by 1 to 4 years on most loans. The lender must comply if:

1. You're current on payments (no 30-day late in last 12 months, no 60-day late in last 24).
2. The home has not declined in value (some lenders require a Broker Price Opinion or appraisal at your expense — typically $150 to $500).
3. There are no junior liens (HELOC, second mortgage) that would push combined LTV back above 80%.

The request must be in writing. Most lenders have a one-page form. Send it certified mail or via the lender's secure portal so you have a timestamped record.

Path 3: Re-Appraisal Based on Appreciation

This is the path most homeowners miss. If your home has appreciated, you may already be at 80% LTV against the current value even if your balance hasn't moved much. Fannie Mae and Freddie Mac both accept this:

• If you've owned the home 2 to 5 years, you can request PMI removal at 75% LTV against current appraised value.
• If you've owned the home 5+ years, the threshold is 80% LTV against current appraised value.
• You'll need a lender-ordered appraisal (not a Zillow estimate). Cost: typically $400 to $700.

Worth doing if recent comps in your neighborhood have moved 10% or more since you bought. Pull comparable sales from the county assessor or a real estate agent before paying for an appraisal — if the comps don't support 80% LTV, the appraisal will fail and you've lost the fee.

Path 4: Refinance Out of PMI

If current rates are within ~0.5 points of your existing rate and your home has appreciated, refinancing into a new conventional loan with sub-80% LTV eliminates PMI in one step. The break-even on a refinance is the closing costs divided by monthly savings — typically 18 to 36 months. If you plan to stay longer than the break-even, refinancing is the cleanest path.

Run the math: model the new loan in the mortgage calculator, subtract the old payment from the new one (including the PMI you're escaping), and divide closing costs by that monthly savings.

What About FHA Loans?

FHA mortgage insurance (MIP) is structured differently and the HPA does not apply. On most post-2013 FHA loans with under 10% down, MIP runs for the full 30-year term — you cannot drop it by paying down. The only exit is to refinance into a conventional loan once you have 20% equity. This is one of the strongest arguments for putting 5% down on a conventional loan instead of 3.5% on FHA when both are available.

Common Mistakes

• Waiting for the lender to tell you. They won't. Servicer revenue includes a sliver of the PMI premium; they're not motivated to remind you.
• Confusing "midpoint termination" with the 78% rule. Midpoint termination (PMI ends halfway through the loan term regardless of LTV) is a separate HPA provision that only matters if your loan is amortizing slowly.
• Skipping the certified mail. If the lender claims they didn't receive the request, the burden is on you to prove they did.
• Paying for an appraisal before checking comps. A failed appraisal still costs you the fee.

The Decision Framework

1. Pull your current loan balance and the original purchase price. Compute current LTV against original price.
2. If LTV ≤ 80% on original price → file a written request today (Path 2).
3. If LTV > 80% on original price but the neighborhood has clearly appreciated → check comps, consider an appraisal (Path 3).
4. If neither and rates are close to your current rate → model a refinance (Path 4).
5. Otherwise, mark your calendar for the automatic-termination date from the mortgage calculator's PMI line (Path 1).

Sources

Homeowners Protection Act of 1998 (12 U.S.C. § 4901 et seq.); CFPB Mortgage Servicing Rules; Fannie Mae Servicing Guide B-8.1; Freddie Mac Single-Family Seller/Servicer Guide §8203.