When Do You Pay PMI and When Does It Stop? The 80% and 78% Rules

On a conventional mortgage, you pay private mortgage insurance when your down payment is less than 20% of the home’s price, and those payments stop once you’ve built enough equity: by your written request at 80% loan-to-value, automatically at 78%, or at the loan’s midpoint as a final backstop. That’s the short answer to when you pay PMI and when it stops. The details below matter because the gap between the 80% and 78% milestones can easily be a year of payments you didn’t have to make.

When PMI Starts

PMI is required whenever your down payment is below 20% of the purchase price on a conventional loan.¹ Lenders measure this with the loan-to-value ratio: your loan amount divided by the property’s value. Put 10% down and your LTV is 90%. Anything above 80% triggers PMI.

The “original value” that governs your cancellation milestones is fixed at closing. It’s the lower of the purchase price or the appraised value at that time.² The same rule applies if you refinance a conventional loan with less than 20% equity.¹

PMI protects the lender against loss if you default. You pay for it anyway, which is why knowing exactly when it ends matters.

When PMI Stops: The Three Endings

Federal law under the Homeowners Protection Act gives you three separate paths out of PMI. Any one of them ends the payments.

You Request Cancellation at 80% LTV

Once your balance reaches 80% of the home’s original value, you have the right to ask your servicer to cancel PMI. The request must be in writing, and you have to meet four conditions:²

Submit the cancellation request in writing.
Have a good payment history. Fannie Mae’s servicing guidelines define this as no payments 30 or more days late in the past 12 months and no payments 60 or more days late in the past 24 months.³
Be current on your payments at the time of the request.
Certify that no additional liens encumber the property beyond what the servicer already knows about.

Your servicer can also require evidence that the property hasn’t dropped in value below the original value, usually an appraisal.² The type of evidence must be established in advance and communicated to you when you make your request. An appraisal typically costs a few hundred dollars, and eliminating PMI usually earns that back within months.

Extra principal payments help here: they can bring your balance to 80% ahead of schedule. Just remember you have to send the written request. Extra payments alone don’t trigger anything.

Automatic Termination at 78% LTV

If you never submit a request, your servicer must automatically end PMI once the loan balance is scheduled to reach 78% of the original value.² Two things about this rule catch borrowers off guard:

First, it runs on the amortization schedule set at closing, not your actual balance. Extra payments don’t move this date. Second, you have to be current when the 78% date arrives. If you’re behind, automatic termination happens on the first day of the month after you catch up.²

Because automatic termination runs on the original schedule, requesting cancellation at 80% is almost always faster. The gap between those two milestones can represent a year or more of PMI you weren’t required to keep paying.

Midpoint of the Loan Term

PMI can never be required past the midpoint of your loan’s amortization period. For a 30-year mortgage, that’s 15 years in.⁴ This backstop matters mostly for adjustable-rate or interest-only structures where the balance may not reach 78% on the normal schedule. You still have to be current on payments for midpoint termination to take effect.

Canceling Early When Your Home Has Gained Value

You don’t necessarily have to wait for the amortization schedule to bring your balance down. If market appreciation or improvements have raised your home’s value, a new appraisal can push your current LTV low enough to qualify for cancellation. The thresholds depend on the loan’s investor and how long you’ve held the mortgage.

For Fannie Mae loans on a one-unit primary residence or second home:³

Between two and five years into the loan, your current LTV must be 75% or less based on a new valuation.
After five years, an LTV of 80% or less is enough.
If home improvements drove the increase in value, Fannie Mae may waive the two-year seasoning requirement, but the LTV still has to be 80% or less.

Investment properties and multi-unit residences face tighter rules: an LTV of 70% or less with at least two years of seasoning.³ In every case, you’ll need a new appraisal that inspects the interior and exterior, and you must meet the same payment-history rules described above.

High-Risk Loan Exception

The automatic 78% termination doesn’t apply to loans classified as “high risk.”⁵ These fall into two groups. Conforming high-risk loans are defined by Fannie Mae or Freddie Mac, though neither has formally designated any category as high risk under the HPA to date. Nonconforming high-risk loans are defined by individual lenders, and PMI on those must terminate when the scheduled balance reaches 77% of original value rather than 78%. The midpoint rule still applies in both cases. If your loan carries a high-risk designation, your lender must disclose that at closing.

When These Rules Don’t Apply

Two situations sit outside the framework above, and it’s worth knowing where the boundaries are.

Lender-paid mortgage insurance. Some lenders offer LPMI, where the insurance cost is baked into a higher interest rate instead of a separate premium. You won’t see a PMI line item, but LPMI cannot be canceled by you and does not automatically terminate under the Homeowners Protection Act. The only ways out are refinancing, paying off the loan, or otherwise ending it.⁵

Government-backed loans. PMI is a conventional-loan concept. FHA, VA, and USDA loans have their own mortgage insurance or fee structures with different cancellation rules. FHA insurance, for example, generally lasts the life of the loan if you put less than 10% down, and refinancing into a conventional loan is often the only way to shed it. VA loans don’t carry monthly mortgage insurance at all, though most borrowers pay a one-time funding fee.

What to Do Next

Pull out your closing documents and find the initial amortization schedule your lender was required to provide. It shows the exact month your balance is projected to hit 80% and 78% of original value. Set a calendar reminder for the 80% date, and send your written cancellation request to the servicer that month. If your neighborhood has appreciated, ask the servicer what an early cancellation based on current value would require. The appraisal fee is small compared with what you’ll save by ending PMI even a few months sooner.

1
Consumer Financial Protection Bureau. What Is Private Mortgage Insurance?
2
Office of the Law Revision Counsel. 12 USC 4902 – Termination of Private Mortgage Insurance
3
Fannie Mae. Termination of Conventional Mortgage Insurance
4
Office of the Law Revision Counsel. 12 USC 4902 – Termination of Private Mortgage Insurance
5
Consumer Financial Protection Bureau. Homeowners Protection Act (PMI Cancellation Act) Procedures