How To Get Rid Of Private Mortgage Insurance (PMI)

FG Trade/GettyImages; Illustration by Hunter Newton/Bankrate

If you put less than 20 percent down on your home with a conventional mortgage, you’re probably familiar with PMI, or private mortgage insurance. It’s a policy you must buy to protect your lender in the event that you default on your mortgage, and you’ll typically pay premiums as part of your monthly mortgage payment — but it doesn’t last forever. Here’s how to get rid of it.

When does PMI go away?

The Homeowners Protection Act of 1998 (HPA) requires that mortgage lenders or servicers automatically cancel PMI when the mortgage’s loan-to-value (LTV) ratio reaches 78 percent of the home’s purchase price, or the month after you reach the loan term’s midpoint — for example, 15 years on a 30-year loan.

How to get rid of PMI

1. Wait for automatic or final termination of PMI.
2. Request PMI cancellation when your mortgage balance reaches 80 percent.
3. Pay down your mortgage earlier.
4. Refinance your mortgage.
5. Reappraise your home.

1. Wait for automatic or final termination of PMI

This is the hands-off option: Just wait until your lender or servicer cancels PMI. Remember, this automatically happens when your mortgage balance hits 78 percent of the home’s purchase price, or the month after the halfway point of your loan’s term, whichever comes first.

2. Request PMI cancellation when your mortgage balance reaches 80 percent

While the first option is the most convenient, if you wait for your lender to automatically cancel PMI, you’ll pay a bit more than you need to. Instead, you can request that the lender cancel PMI sooner, when your mortgage balance hits 80 percent of the home’s purchase price. Here’s how:

• Make the PMI cancellation request to your lender or servicer in writing.
• Be current on your mortgage payments, with a good payment history.
• Confirm there are no other liens on your home — for example, a second mortgage.
• If needed, get a home appraisal to confirm your home’s value hasn’t decreased.

You can find the date that your loan balance reaches 80 percent on your PMI disclosure form, assuming you’ve been making your payments as scheduled. If you don’t have this form, request it from your servicer.

3. Pay down your mortgage earlier

If you have room in your budget, paying extra toward your principal can help you hit 20 percent equity faster. To estimate the amount your mortgage balance needs to reach to be eligible for PMI cancellation, multiply your home’s purchase price by 0.80.

You can prepay your mortgage in several ways, including by making biweekly payments or an additional payment each year, or by paying one lump sum at any time. Check with your lender or servicer to ensure those extra payments go to the loan’s principal, not your next payment or interest.

4. Refinance your mortgage

If mortgage rates have decreased, refinancing to a new loan with a lower balance could help you reach the PMI cancellation window sooner. Refinancing costs money, however, and it typically only makes sense if you can lower your interest rate.

5. Reappraise your home

Your home could reach the 20 percent equity level ahead of the mortgage payment schedule due to price appreciation, or if you made significant improvements that increased its value.

In this case, consider paying for a new appraisal to — hopefully — get a higher valuation. If you’ve owned the home for at least five years and your loan balance is no more than 80 percent of the new valuation, you can ask for PMI cancellation. If you’ve owned the home for at least two years, your remaining mortgage balance must be no greater than 75 percent.

An appraisal usually costs a few hundred dollars, depending on location and the characteristics of your property. Some lenders might be willing to accept a broker price opinion instead, which is often a bit cheaper.

Why prospective homebuyers shouldn’t stress about PMI

If you’re thinking about buying a home and you’re stressing about paying for private mortgage insurance, take a deep breath. In reality, many homebuyers deal with this cost: The median down payment for first-time buyers was just nine percent in 2024, according to the National Association of Realtors, which means that PMI is part of a lot of people’s lives. So, if you’re tempted to drain your savings account to avoid PMI, Stephen Kates, CFP, financial analyst at Bankrate, recommends rethinking your approach.

“Using all your cash savings just to hit a 20 percent down payment is a mistake,” Kates says. “It’s essential to keep some financial cushion, especially during major life transitions like moving, changing jobs, getting married or having a baby. Unexpected expenses are bound to arise, and stepping into your new home without any savings leaves you vulnerable to taking on debt to cover costs you couldn’t have predicted.”

FAQ

• How much does PMI cost?
  

  The average PMI payment ranges from $30 to $70 per month for every $100,000 you borrow, according to Freddie Mac. For example, if you get a $400,000 mortgage, you can expect to pay between $120 and $280 per month. Annual PMI premiums range from 0.46 percent to 1.5 percent of your mortgage, depending on your credit score and other factors, according to the Urban Institute.

• What are the benefits of having PMI?
  

  The main benefit of having PMI is that it allows you to make a smaller down payment on a home. In a pricey housing market, that means you can potentially buy a home sooner than if you decided to wait until you could afford a 20 percent down payment — the minimum you need to avoid PMI.

• Can PMI be removed if your home value increases?
  

  Possibly. If your home’s value increases — either thanks to appreciation or renovations — you might be eligible to request a PMI cancellation. You’ll need to pay for a home appraisal to verify the new market value.