What Is PMI and How Do You Get Rid of It?
What is PMI, and how do you remove it from your mortgage?
Private mortgage insurance (PMI) is required on most conventional loans when your down payment is under 20%, and it protects your lender, not you, if you default. Federal law requires your servicer to automatically cancel PMI once your loan balance reaches 78% of your home’s original value, and you can request cancellation yourself once you hit 80%, provided you’re current on payments. Home appreciation, extra principal payments, and refinancing are the three main ways to get there faster.
By The Chad Smith Team | August 10, 2026
If you put down less than 20% on a conventional loan, you’re almost certainly paying PMI every month — and it’s one of the easiest costs to stop paying once you know the rules.
Here’s what PMI actually is, and the paths to getting rid of it.
What PMI Actually Protects
Private mortgage insurance doesn’t protect you. It protects your lender in case you default on a loan where you had less equity cushion at the start. Lenders require it on most conventional loans with less than 20% down because a smaller down payment means more risk for them if the loan goes bad.
It’s a real monthly cost, typically ranging from about 0.5% to 1.5% of your loan amount annually, split across your monthly payments. On a $350,000 loan, that can mean anywhere from roughly $145 to $440 a month — money that isn’t building equity or paying down principal.
The Legal Cancellation Rules
The Homeowners Protection Act sets two clear thresholds for conventional loans:
Automatic cancellation at 78% LTV. Your servicer is legally required to cancel PMI automatically once your principal balance is scheduled to reach 78% of your home’s original value — as long as you’re current on your payments. This happens without you having to ask, based on your original amortization schedule.
Borrower-requested cancellation at 80% LTV. You don’t have to wait for the automatic threshold. Once your loan balance reaches 80% of the original value, you can submit a written request to your servicer. To get approved, you generally need:
• A good payment history with no late payments
• To be current on your mortgage
• No additional liens on the property, such as a second mortgage
• Confirmation that your home’s value hasn’t dropped since closing
Three Ways to Get There Faster
1. Extra principal payments. Every additional dollar toward principal moves your loan-to-value ratio down faster than your regular amortization schedule. Even modest extra payments, applied consistently, can shave years off the timeline to 80% LTV — a strategy worth revisiting if you bought with low credit or a small down payment.
2. Home appreciation and a new appraisal. If your home’s value has increased since closing, you may be able to reach 80% LTV faster than your loan balance alone would suggest. Lenders typically allow a borrower-paid appraisal starting around two years after closing, and between years two and five, that appraisal generally needs to show an LTV of 75% or lower to qualify for removal, since lenders apply a more conservative standard to appreciation-based requests than to paydown-based ones.
3. Refinancing. If mortgage rates have improved or your equity has grown enough, refinancing into a new conventional loan at 80% LTV or better eliminates PMI on the new loan entirely. This makes the most sense when refinancing also gets you a better rate — removing PMI alone usually isn’t reason enough to refinance if it means giving up a lower existing rate.
What to Watch Out For
A few details trip people up:
• FHA loans work differently. Most FHA loans carry mortgage insurance premiums (MIP) for the life of the loan if your down payment was under 10%, and PMI removal rules for conventional loans don’t apply. Refinancing into a conventional loan is typically the only way out of FHA MIP — worth exploring alongside other first-time home buyer programs if you originally bought with a low down payment.
• Being late on payments resets the clock. If you have a late payment in the 12 months before hitting your cancellation threshold, servicers can delay approval until you’ve re-established a clean payment history.
• A second mortgage or home equity line can block cancellation, since lenders look at your combined loan balance against the home’s value, not just your first mortgage.
Check Your Numbers
Pull your most recent mortgage statement and compare your current balance to your original purchase price or your last appraised value. If you’re getting close to 80%, it’s worth a call to your servicer to confirm their specific process and paperwork requirements — they vary slightly by lender.
Frequently Asked Questions
How much does PMI typically cost per month?
PMI generally runs 0.5% to 1.5% of your loan amount annually, which usually breaks down to somewhere between $50 and a few hundred dollars a month depending on your loan size and credit profile.
Can I remove PMI before reaching 80% loan-to-value?
Generally no for standard borrower-requested cancellation, though automatic cancellation kicks in at 78% regardless of whether you request it. Home appreciation combined with a new appraisal is the main path to removing it earlier than your amortization schedule would otherwise allow.
Does refinancing always remove PMI?
Refinancing removes PMI if your new loan is at or below 80% loan-to-value, since a new conventional loan at that level typically doesn’t require mortgage insurance. If you’re still under 80% equity, refinancing may still carry PMI on the new loan.
Is PMI removal the same for FHA loans?
No. FHA loans use mortgage insurance premiums (MIP), which often last for the life of the loan if your down payment was under 10%. Refinancing into a conventional loan is usually required to eliminate it.
What happens if my home’s value dropped since I bought it?
If your home’s value has declined, reaching 80% loan-to-value through appreciation isn’t an option, and your servicer may deny an appraisal-based request. In that case, extra principal payments become your most reliable path.
If you’re weighing whether refinancing to remove PMI makes sense given where rates and your equity stand today, we’re glad to talk through the numbers with you.
About The Chad Smith Team
The Chad Smith Team at Realty of America is one of the top-producing real estate teams in the Dallas-Fort Worth Metroplex, with more than 22 years of experience, 2,915 homes sold, and recognition by RealTrends among the top 1% of real estate professionals nationwide. The team helps first-time buyers, sellers, relocation clients, and new construction buyers throughout Arlington, Mansfield, Fort Worth, Midlothian, Waxahachie, and surrounding DFW communities. Through this blog, the Chad Smith Team shares expert market insights and practical advice to help North Texas buyers and sellers make informed real estate decisions.
