Steps to Eliminate PMI on Your Mortgage

Quick answer

• Review your mortgage statement for your Loan-to-Value (LTV) ratio.
• Aim to reach 80% LTV or lower to request PMI cancellation.
• Understand your loan type: conventional, FHA, or VA loans have different rules.
• Check if your lender allows automatic cancellation or requires a formal request.
• Consider making extra principal payments to accelerate LTV reduction.
• Be prepared for a potential appraisal if your lender requires one.

Who this is for

• Homeowners with conventional mortgages who are paying Private Mortgage Insurance (PMI).
• Individuals who have consistently made their mortgage payments on time.
• Those who have seen their home’s value increase or have paid down a significant portion of their principal.

What to check first (before you act)

Your Mortgage Loan Type

Not all mortgages require PMI. PMI is typically associated with conventional loans where the initial down payment was less than 20% of the home’s purchase price. If you have an FHA loan, you likely have Mortgage Insurance Premium (MIP), which has different cancellation rules. VA loans do not have PMI.

Your Loan-to-Value (LTV) Ratio

This is the most critical factor. Your LTV is the outstanding loan balance divided by the home’s current market value. Lenders generally require your LTV to be 80% or lower to consider canceling PMI. Some lenders may allow cancellation at 78% LTV automatically.

Your Mortgage Payment History

Lenders want to see a history of reliable payments. If you’ve had late payments, it may affect your ability to have PMI removed, even if your LTV is low enough.

Your Home’s Current Market Value

While lenders use LTV, understanding your home’s actual market value is crucial. Has your neighborhood seen appreciation? Have you made significant improvements? This information will help you determine if you’ve likely reached the LTV threshold.

Your Mortgage Servicer’s Policies

Each mortgage servicer has its own procedures for PMI cancellation. Some may automatically cancel PMI once you reach a certain LTV, while others require a formal written request. Check your original loan documents or contact your servicer directly.

Step-by-step (simple workflow)

1. Review Your Mortgage Statement:

• What to do: Locate your most recent mortgage statement. Find the outstanding principal balance and your original loan amount or purchase price.
• What “good” looks like: You can clearly identify your current loan balance and the original value of your home.
• Common mistake and how to avoid it: Not knowing where to find your statement. Keep digital or physical copies of your mortgage statements organized.

2. Calculate Your Current Loan-to-Value (LTV) Ratio:

• What to do: Divide your current outstanding principal balance by your home’s original purchase price. For example, if your loan balance is $200,000 and your home’s purchase price was $250,000, your LTV is $200,000 / $250,000 = 80%.
• What “good” looks like: You have a clear percentage that indicates your LTV.
• Common mistake and how to avoid it: Using the current appraised value instead of the original purchase price for the initial calculation of when PMI can be dropped. Lenders often use the original purchase price unless a new appraisal is ordered.

3. Determine Your Target LTV for PMI Cancellation:

• What to do: The standard threshold is 80% LTV. Many lenders automatically cancel PMI when you reach 78% LTV. Check your loan documents or contact your servicer for their specific requirements.
• What “good” looks like: You know the exact LTV percentage needed to request or expect PMI cancellation.
• Common mistake and how to avoid it: Assuming all lenders have the same cancellation LTV. Always verify with your specific mortgage servicer.

4. Assess Your Home’s Current Market Value (If Needed):

• What to do: If your LTV calculation using the original purchase price is still above 80%, you may need to consider your home’s current market value. Research recent sales of comparable homes in your area or consult a real estate agent.
• What “good” looks like: You have a reasonable estimate of your home’s current market value.
• Common mistake and how to avoid it: Overestimating your home’s value. Be realistic based on market data.

5. Check for Automatic PMI Cancellation:

• What to do: Review your mortgage terms or contact your servicer. Some lenders automatically cancel PMI once you reach a certain LTV (often 78%) without you needing to do anything.
• What “good” looks like: Your servicer confirms that PMI will be automatically removed.
• Common mistake and how to avoid it: Assuming cancellation will happen automatically without confirmation. Always verify.

6. Consider Making Extra Principal Payments:

• What to do: If your LTV is close to the target but not quite there, making extra payments directly applied to the principal can speed up the process. Ensure you clearly designate these extra payments as principal only.
• What “good” looks like: Your principal balance decreases faster, helping you reach the target LTV sooner.
• Common mistake and how to avoid it: Paying extra towards interest or fees instead of principal. Always specify “principal only” for extra payments.

7. Formally Request PMI Cancellation (If Required):

• What to do: If your servicer doesn’t automatically cancel PMI, you’ll need to submit a written request. This usually happens when you reach 80% LTV.
• What “good” looks like: You have a confirmation from your servicer that your request has been received and is being processed.
• Common mistake and how to avoid it: Not submitting a written request when one is needed. Keep a copy of your written request for your records.

8. Prepare for a Potential Appraisal:

• What to do: Your lender may require an appraisal to confirm your home’s current value, especially if you are requesting cancellation at 80% LTV and they don’t have a recent valuation. You will likely have to pay for this appraisal.
• What “good” looks like: The appraisal confirms your home’s value is sufficient to bring your LTV to 80% or below.
• Common mistake and how to avoid it: Being surprised by the appraisal cost. Budget for this possibility.

9. Receive Confirmation of PMI Removal:

• What to do: Once approved, your servicer will send you a confirmation that PMI has been removed. Review your next mortgage statement to ensure the PMI charge is no longer included.
• What “good” looks like: Your mortgage statement no longer shows a PMI premium.
• Common mistake and how to avoid it: Not verifying the removal. Always double-check your statements after the expected cancellation date.

Common mistakes (and what happens if you ignore them)

Mistake	What it causes	Fix
Not knowing your LTV ratio	Paying PMI longer than necessary, costing you hundreds or thousands of dollars.	Regularly check your mortgage statements and calculate your LTV. Aim for 80% or lower.
Assuming PMI is automatically removed	Continuing to pay PMI even after reaching the LTV threshold.	Contact your mortgage servicer to understand their cancellation policy and confirm when PMI will be removed.
Not understanding your loan type	Following the wrong cancellation procedures (e.g., trying to cancel FHA MIP like PMI).	Identify if you have a conventional, FHA, or VA loan. Research the specific insurance removal rules for your loan type.
Making extra payments incorrectly	Extra payments not reducing principal, thus not lowering your LTV.	Clearly instruct your servicer to apply extra payments <em>only</em> to the principal balance.
Ignoring your mortgage servicer’s policies	Missing deadlines or not fulfilling requirements for cancellation.	Read your loan documents and communicate with your servicer to understand their specific PMI removal process and documentation needs.
Failing to request cancellation	Paying PMI unnecessarily if automatic removal isn’t an option.	If your servicer requires a formal request, submit it in writing once you meet the LTV requirements. Keep a copy of your request.
Not budgeting for an appraisal	Being caught off guard by the cost if a new appraisal is required.	Factor in the potential cost of an appraisal ($300-$600 or more) when planning your PMI removal strategy.
Not verifying PMI removal	Continuing to pay PMI due to administrative errors.	Always review your mortgage statements after the expected cancellation date to confirm the PMI charge has been removed.
Miscalculating your home’s value	Submitting a request for cancellation based on an inaccurate valuation.	Use reliable sources like recent comparable sales or professional real estate advice to estimate your home’s current market value accurately.
Having a history of late payments	Being denied PMI cancellation even if LTV is met.	Maintain a consistent on-time payment history for your mortgage. If you’ve had late payments, focus on improving your payment record before requesting cancellation.

Decision rules (simple if/then)

• If your current LTV is 80% or lower, then you may be eligible to request PMI cancellation because lenders generally require this threshold.
• If your LTV is 78% or lower, then check if your mortgage servicer automatically cancels PMI because many do at this level.
• If you have an FHA loan, then you likely have MIP, not PMI, and must follow FHA’s specific rules for mortgage insurance termination.
• If your mortgage is a VA loan, then you do not have PMI and do not need to take any action to remove it.
• If your initial down payment was 20% or more on a conventional loan, then you should not be paying PMI and should investigate this with your servicer.
• If your home’s value has significantly increased, then you may reach the 80% LTV threshold sooner, even without making extra principal payments.
• If you are considering making extra payments, then ensure they are applied directly to the principal to effectively lower your LTV.
• If your servicer requires an appraisal, then be prepared to pay for it as it’s a condition for PMI removal at the 80% LTV.
• If your request for PMI cancellation is denied, then review the reason provided by your servicer and address any outstanding issues.
• If you consistently make on-time payments, then you strengthen your case for PMI removal when you meet the LTV requirements.
• If your loan is from before July 2013, then your PMI cancellation rights are governed by the Homeowners Protection Act, which mandates automatic termination under certain conditions.
• If you are unsure about your loan terms or servicer policies, then contact your mortgage servicer directly for clarification.

FAQ

Q: How long does it typically take to get PMI removed?

A: It depends on your LTV, how quickly you pay down your principal, and any home appreciation. It can take anywhere from a few years to over a decade if you don’t actively work towards it.

Q: Can I get PMI removed if I had a few late payments in the past?

A: It might be more challenging, but not impossible. Lenders will consider your overall payment history. Focus on maintaining a perfect payment record going forward.

Q: What if my home’s value has gone down since I bought it?

A: If your home’s value has decreased, your LTV might be higher than you think. You may need to wait until your principal balance decreases significantly or home values recover.

Q: Do I need to refinance my mortgage to get rid of PMI?

A: Not necessarily. Refinancing can be an option, especially if interest rates have dropped, but you can often remove PMI directly through your current lender if you meet the LTV requirements.

Q: Can I negotiate with my lender to remove PMI early?

A: Generally, no. PMI removal is based on specific LTV thresholds and payment history as outlined in your loan agreement and federal regulations.

Q: How do I know if my PMI has actually been removed?

A: Your mortgage servicer will notify you in writing. You should also see the PMI charge disappear from your monthly mortgage statement.

Q: What is the difference between PMI and MIP?

A: PMI is for conventional loans, typically when the down payment is less than 20%. MIP is for FHA loans and has different rules for cancellation and duration.

Q: Is there a fee to remove PMI?

A: You typically don’t pay a fee to request cancellation, but your lender may charge you for a new appraisal if they require one to verify your home’s current value.

What this page does NOT cover (and where to go next)

• Specific details on FHA MIP cancellation procedures. (Next: Research FHA MIP removal guidelines.)
• Strategies for dealing with underwater mortgages (where your loan balance exceeds your home’s value). (Next: Explore options for borrowers with negative equity.)
• The impact of PMI on your credit score. (Next: Learn about how mortgage payments affect your credit.)
• Detailed advice on refinancing your mortgage. (Next: Research mortgage refinancing options and best practices.)
• Tax deductibility of PMI. (Consult a tax professional for current tax laws and your specific situation.)