How to Get Out of PMI: Cancellation, Termination, and Refinancing

To get out of PMI on a conventional loan, you have four practical routes: ask your servicer in writing to cancel it once your balance hits 80 percent of the home’s original value, let it terminate automatically at 78 percent, request removal based on a new appraisal if your home has gained value, or refinance into a loan that does not require mortgage insurance. Federal law under the Homeowners Protection Act guarantees the first two paths for conventional loans on primary residences that closed on or after July 29, 1999.¹

Request Cancellation at 80 Percent Equity

The fastest way out is a written request to your servicer once your loan balance reaches 80 percent of the home’s original value.² Original value means the lesser of your purchase price or the appraised value at closing. If you refinanced into your current conventional loan, original value is the appraised value used for that refinance.³

You can reach 80 percent through scheduled amortization or by paying down principal faster than the schedule. Either counts. To qualify, federal law requires four things:²

A written request to your servicer.
A clean payment record: no payment 30 or more days late in the last 12 months, and none 60 or more days late in the 12 months before that.
Current on your mortgage when you ask.
Evidence that the home’s value has not fallen below the original value, plus certification that no second mortgage or home equity line of credit is attached to the property.

A subordinate lien is a common blocker. If you have a HELOC or second mortgage, you generally cannot get borrower-requested cancellation until that lien is paid off or released.

Automatic Termination at 78 Percent

If you never send a request, your servicer still has to stop charging PMI on the date your balance is scheduled to reach 78 percent of the original value.² The date is fixed by your amortization schedule, not by what you actually owe. Extra principal payments do not accelerate it. If you are behind when the date arrives, PMI ends the first day of the month after you catch up.

If you have paid down extra principal and want that credited, skip automatic termination and file the written request under the 80 percent rule instead.

Midpoint Backstop

Every covered loan has a final safety net. If PMI has not already come off, your servicer must remove it on the first day of the month after you pass the midpoint of the amortization period — year 15 of a 30-year mortgage, year 10 of a 20-year loan.² You have to be current, but no equity math or appraisal is required.

Cancellation When Your Home Has Gained Value

The three federal paths measure against your home’s original value. If prices in your area have jumped, you may already have enough equity based on today’s value. Fannie Mae and Freddie Mac both allow PMI removal based on current market value for the loans they back.¹

Fannie Mae’s servicing guidelines set these thresholds for a one-unit primary residence or second home:⁴

Loans 2 to 5 years old: current loan-to-value ratio of 75 percent or less.
Loans older than 5 years: 80 percent or less.
Loans under 2 years old: the seasoning requirement can be waived if substantial improvements raised the property’s value, but the ratio still has to be 80 percent or less.

Substantial improvements means work that meaningfully increases market value and extends the home’s useful life, like a kitchen or bathroom remodel or added square footage. Routine repairs do not count.⁴ Your servicer will require a new appraisal or, in some cases, a broker price opinion.

Refinancing Out of PMI

Replacing your loan with a new one is another exit. If the new balance is less than 80 percent of the current appraised value, the new lender will not require mortgage insurance.⁵ A refinance can also cut your interest rate, but you need the savings to outweigh the upfront cost.

Closing costs on a refinance usually run 2 to 6 percent of the loan amount. On a $300,000 loan, that is $6,000 to $18,000. Divide the total closing costs by the monthly savings you expect (dropped PMI plus any rate reduction), and the answer is how many months you need to stay put before the refinance pays for itself. Selling before that break-even point turns the refinance into a loss.

How to Submit the Request

Pull your most recent statement and note your current balance. Compare it to the home’s original value. If dividing balance by original value gives you 0.80 or less, you are at the threshold and can ask.

The request has to be in writing.² Many servicers publish a PMI removal form; you can also write your own letter. Include your loan number, property address, current balance, and the original value. Send it certified mail with a return receipt so you have proof of delivery.

If your servicer wants a new appraisal (either to verify the home has not lost value or because you are asking for cancellation based on current value), you pay for it. Standard single-family appraisals typically run about $300 to $600, with location and complexity driving the price. The servicer usually picks the appraiser.

What Happens After PMI Comes Off

Once cancellation or termination is confirmed, your servicer has to stop collecting mortgage insurance premiums within 30 days.⁴ Any unearned premium you already paid for coverage after the cancellation date has to be refunded within 45 days.²

Because PMI is often paid through escrow, removal shifts your escrow balance. The servicer may run a new escrow analysis and reset your monthly payment, or roll the surplus into the next annual review. Either way, your monthly payment should drop by roughly what the PMI premium had been.

If Your Servicer Denies the Request

A denial has to come in writing within 30 days, and it must give specific reasons. If an appraisal was involved, the servicer has to share the results with you.⁶

If you believe the servicer is violating the Homeowners Protection Act, you can file a complaint with the Consumer Financial Protection Bureau, which enforces the Act. You can also sue within two years of discovering the violation. Available remedies include actual damages with interest, statutory damages up to $2,000, court costs, and reasonable attorney fees.⁶

When These Rules Do Not Apply

A few common situations sit outside the cancellation rights above, and they trip up borrowers who assume the same rules cover them.

Lender-paid mortgage insurance. With LPMI, the lender pays the insurance and typically charges a higher interest rate to make up for it. LPMI cannot be cancelled by request and does not terminate under the Homeowners Protection Act.⁶ It ends only when the loan ends: refinance, sale, or full payoff.

FHA loans. FHA loans carry a mortgage insurance premium, not PMI, and the Homeowners Protection Act does not apply. For FHA loans originated after June 3, 2013, MIP lasts the life of the loan if your down payment was under 10 percent. With 10 percent or more down, MIP drops off after 11 years. Otherwise, refinancing into a conventional loan is the way out.

VA loans. VA-backed loans do not charge monthly mortgage insurance. Most borrowers pay a one-time funding fee of 0.5 to 3.3 percent of the loan amount, depending on down payment and whether it is your first use of the VA benefit. Veterans with service-connected disabilities and Purple Heart recipients on active duty are exempt.⁷

USDA loans. USDA guaranteed loans charge an annual fee that lasts the life of the loan and does not fall off at 80 percent equity.⁸ Refinancing into a conventional loan is the practical way to end the charge.

The through-line for any of these is the same: once you have at least 20 percent equity, refinancing into a conventional loan removes the ongoing insurance charge.

1
Consumer Financial Protection Bureau. When Can I Remove Private Mortgage Insurance (PMI) From My Loan
2
Office of the Law Revision Counsel. 12 USC 4902 – Termination of Private Mortgage Insurance
3
Office of the Law Revision Counsel. 12 USC 4901 – Definitions
4
Fannie Mae. Termination of Conventional Mortgage Insurance
5
Consumer Financial Protection Bureau. What Is Private Mortgage Insurance
6
Consumer Financial Protection Bureau. Homeowners Protection Act Procedures
7
VA News. Home Loan Borrowers Can Now Deduct Funding Fees
8
USDA. Upfront Guarantee Fee and Annual Fee