If you put less than 20% down on a conventional loan, there's a good chance you're paying private mortgage insurance (PMI). Here's the part nobody tells you at closing: PMI protects the lender, not you, and it isn't supposed to last forever.
When I worked in loan servicing, I saw homeowners keep paying PMI for months, even years, longer than they had to, simply because nobody asked to take it off. Don't be one of them.
The two numbers to know: 80% and 78%
For most conventional loans on your main home, a federal law called the Homeowners Protection Act sets the rules:
- 80%: you can ask. Once your loan balance is scheduled to reach 80% of your home's original value, you can request in writing that PMI be cancelled. If extra payments get you there sooner, you can ask sooner.
- 78%: it should end on its own. When your balance is scheduled to hit 78% of the original value, PMI generally has to end automatically, as long as you're current on your payments.
- Halfway point. Even if you never hit 78%, PMI has to end the month after you reach the midpoint of your loan term (year 15 on a 30-year loan), as long as you're current.
"Original value" usually means the lower of your purchase price or the appraised value when you bought the home.
What your servicer can ask for
When you request cancellation at 80%, your servicer can require that:
- Your request is in writing.
- You have a good payment history and are current.
- You don't have a second mortgage or other lien on the home.
- Your home hasn't lost value, which usually means an appraisal or valuation.
Call or check your servicer's website first and ask exactly what they need. Some have a PMI removal form. Getting it right the first time saves weeks.
How to get there faster
- Make extra principal payments. Even small amounts add up. Make sure they're applied to principal, not escrow or next month's payment.
- Try bi-weekly payments. Paying half your payment every two weeks works out to one extra full payment a year.
- Ask about your home's current value. If your home has gone up in value or you've made improvements, ask your servicer whether your loan's investor allows PMI removal based on a new appraisal. The rules depend on who owns your loan and how long you've had it.
A quick note on FHA loans
FHA loans have their own mortgage insurance (called MIP), and the rules above don't apply the same way. On many newer FHA loans, MIP lasts for the life of the loan. If that's you, ask your servicer what your loan requires. Some homeowners eventually refinance into a conventional loan to drop it, but run the numbers first, because a refinance has its own costs.
Common questions
When can I remove PMI?
On most conventional loans, you can ask your servicer in writing to cancel PMI once your balance is scheduled to reach 80% of your home's original value, or sooner if extra payments get you there. It generally ends automatically at 78% if you're current.
Does FHA mortgage insurance work the same way?
No. FHA mortgage insurance (MIP) follows different rules, and on many newer FHA loans it lasts for the life of the loan. Ask your servicer what applies to yours. Refinancing into a conventional loan is one way some homeowners drop it.
Will I need an appraisal to remove PMI?
Often, yes. When you request cancellation, your servicer can ask you to show your home hasn't lost value, which usually means an appraisal or valuation they order.
Keep more of your money
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