How to Get Rid of Private Mortgage Insurance (PMI)

Private Mortgage Insurance (PMI) adds $100-$300 to your monthly mortgage payment " — that's $1,200-$3,600 per year for protection that benefits your lender, not you. The good news: federal law requires your lender to automatically cancel PMI once you reach 22% equity, and you can request removal at 20% equity. Here's how to get rid of PMI as fast as possible and save thousands.

What Is PMI and Why Do You Pay It?

PMI is insurance that protects the lender if you default on your mortgage. You're required to pay it when your down payment is less than 20% of the home's purchase price. PMI doesn't protect you " — it protects the bank. That's why removing it should be a top priority.

Example: On a $300,000 loan at 0.75% PMI, you pay $2,250 per year ($187.50/month). Over 7 years (the average time PMI remains), that's $15,750.

Your Federal Rights for PMI Cancellation

The Homeowners Protection Act (HPA) of 1998 gives you specific rights:

Automatic Termination

Your lender must automatically cancel PMI when your loan balance reaches 78% of the original purchase price (22% equity). This happens based on the original amortization schedule " — you don't need to do anything.

Request Cancellation at 80% LTV

You can request PMI cancellation when your loan balance reaches 80% of the original purchase price (20% equity). You must make the request in writing. The lender may require an appraisal to verify the value.

Final Termination

Even if you haven't reached 80% LTV, the lender must cancel PMI when the loan reaches 78% of the original value based on the amortization schedule " — regardless of your home's current value.

5 Ways to Remove PMI Faster

1. Make Extra Principal Payments

Every extra dollar you pay toward principal reduces your loan balance faster, bringing you closer to the 80% LTV threshold. Even small extra payments add up:

Make sure your extra payments go specifically to principal, not to the next month's payment. Contact your lender to confirm how to direct extra payments.

2. Get a New Appraisal

If your home has appreciated significantly, an appraisal can prove you've reached 20% equity. This is especially valuable in hot markets where homes appreciate quickly. Typical appraisal costs $300-$500.

Requirements for appraisal-based removal:

• No late payments in the past 12 months
• Maximum one 30-day late payment in the past 12 months
• Loan must be at least 2 years old (some lenders require 5 years)
• You must have a clean payment history

3. Refinance Your Mortgage

If your home has appreciated enough that you now have 20%+ equity, refinancing into a new conventional loan without PMI can save you money. This is especially smart if current rates are lower than your original rate.

Refinancing costs $2,000-$5,000, so calculate whether the PMI savings justify the expense. If you're paying $187/month in PMI and can eliminate it through refinancing, you'll recoup $3,000-$5,000 in closing costs within 2-3 years.

4. Make a Lump-Sum Principal Payment

If you receive a bonus, tax refund, or inheritance, putting it directly toward your mortgage principal can push you past the 20% threshold quickly. A $15,000 lump-sum payment on a $300,000 mortgage drops your balance to $285,000 " — if the home is worth at least $356,250, you're at 20% equity.

5. Challenge Your Property Tax Assessment

Your loan-to-value ratio is partly based on your home's assessed value. If your property tax assessment is inflated, challenging it can lower your home's official value, potentially pushing you past the equity threshold faster. This strategy works best in areas where assessed values are significantly higher than market values.

PMI Cost by Credit Score

Your PMI rate depends heavily on your credit score. Here's what to expect:

Improving your credit score before buying can significantly reduce your PMI cost. A 60-point credit score improvement can cut your PMI rate in half.