When Does Private Mortgage Insurance Go Away

The initials PMI is written on a glass doorNavigating the Private Mortgage Insurance (PMI) landscape prompts homeowners to ask, "When does PMI go away? " Understanding the duration of PMI is essential, influencing financial planning and decisions.

Typically tied to conventional loans with down payments below 20%, PMI may cease once the loan-to-value ratio improves. Homeowners often explore avenues like reappraisal to remove PMI or seek information on when mortgage insurance falls off.

Delving into the intricacies of PMI removal, including possibilities like automatic reduction over time or reappraisal to eliminate PMI, empowers homeowners to make informed choices regarding when and how to shed this financial obligation.

Key Takeaways:

  • Private Mortgage Insurance (PMI) can be canceled when the mortgage balance falls to 80% of the original value of the home.
  • The Homeowners Protection Act of 1998 requires lenders to remove PMI when the loan-to-value ratio reaches 78% automatically.
  • Other ways to eliminate PMI include making additional principal payments, refinancing, or proving an increase in the home's value through a reappraisal or home improvements.
  • Removing PMI may involve certain costs, such as closing costs for refinancing or fees for a new appraisal.
  • By actively managing their mortgage and building home equity, homeowners can eliminate the need for PMI and save money in the long run.

When Does PMI Go Away?

The Homeowners Protection Act of 1998 sets specific guidelines for when private mortgage insurance (PMI) should be removed from a mortgage. The critical factor is the loan-to-value ratio, which is the ratio of the mortgage balance to the purchase price of the home. When this ratio reaches 78%, lenders are required to remove PMI automatically.

For example, if a home was purchased for $300,000 and the outstanding mortgage balance reaches $234,000, PMI will be automatically removed. This means that homeowners no longer need to make a formal request for PMI cancellation.

This provision of the Homeowners Protection Act ensures that homeowners are not burdened with unnecessary insurance payments once they have built up a significant amount of home equity. However, it's important to note that the Act only applies to conventional loans originated after July 29, 1999. For loans arising before this date, different rules may apply.

Loan-to-Value Ratio and Mortgage Balance

The loan-to-value ratio is a crucial factor in determining when PMI goes away. It is calculated by dividing the mortgage balance by the purchase price of the home. Home improvements or changes in property value can also impact this ratio.

It's worth noting that homeowners who have made additional principal payments towards their mortgage may reach the 78% loan-to-value ratio sooner than anticipated.

In such cases, they can request the cancellation of PMI even before it is automatically removed. This can be done in writing to the lender, along with evidence of the current property value, to prove that the loan-to-value ratio has reached the threshold for PMI removal.

  • The Homeowners Protection Act of 1998 requires lenders to remove PMI when the loan-to-value ratio reaches 78%.
  • This is typically achieved when the mortgage balance reaches 78% of the home's purchase price.
  • PMI removal is automatic and does not require a request from the borrower.

How to Get Rid of PMI

There are several ways to remove private mortgage insurance (PMI) once you no longer need it. Here are some options to consider:

  1. Automatic Termination: If you wait until your loan-to-value ratio drops to 78%, PMI will be automatically terminated. This means that once you have paid down your mortgage balance to 78% of the original value, you will no longer have to pay for PMI. Keep in mind, however, that this termination is automatic and does not require your request.
  2. Request Cancellation: Another option is to request the cancellation of PMI when the mortgage balance reaches 80% of the original value. You will need to submit a written request to your lender, along with any required evidence, to prove that the value of your property has not declined below the original value.
  3. Pay Down Your Mortgage: Making extra principal payments on your mortgage is a great way to accelerate the process of reaching the point where PMI is no longer required. By paying down your mortgage faster, you can reduce the loan-to-value ratio and potentially eliminate the need for PMI.
  4. Refinance: If the value of your home has increased since you purchased it, refinancing can be an effective strategy to eliminate PMI. By refinancing your mortgage, you can take advantage of the higher home value to lower your loan-to-value ratio and remove the need for PMI.
  5. Reappraise Your Home: If you believe that the value of your home has increased significantly, you can consider getting a new appraisal to prove that the loan-to-value ratio is now below the threshold for PMI. Providing the lender with evidence of the increased value may allow you to remove PMI.
  6. Make Home Improvements: Another way to potentially eliminate PMI is by making home improvements that increase the value of your property. By enhancing the condition or features of your home, you can raise its appraised value and lower the loan-to-value ratio.

Consider these options and choose the one that best suits your situation. Review the specific requirements and guidelines your lender sets for PMI removal.

The Process for Removing PMI

The process for removing private mortgage insurance (PMI) depends on the type of insurance you have. If you have Borrower-Paid Mortgage Insurance (BPMI), the first step is to reach 20% equity in your home. Once you have achieved this milestone, you must contact your lender and request the removal of PMI.

For Lender-Paid Mortgage Insurance (LPMI) and Mortgage Insurance Premium (MIP), the process is slightly different. To remove these types of insurance, you will need to refinance your mortgage.

This means comparing lenders, applying for a refinance, and going through the underwriting and appraisal processes. After closing on the new loan, you will no longer have to pay PMI.

Types of PMI and their removal process

  1. BPMI: Reach 20% equity and request removal from the lender.
  2. LPMI and MIP: Refinance the mortgage after reaching 20% equity.

It's important to note that refinancing may come with closing costs, so you should consider the cost of refinancing versus the potential savings from eliminating PMI.

Additionally, you may need to pay for a new appraisal to prove that your home's value has reached the necessary threshold for PMI removal. Keep in mind that building home equity through principal payments or making home improvements can be a more cost-effective option than refinancing.

Considerations for Removing PMI

  • Compare the cost of refinancing to the potential savings from eliminating PMI.
  • Consider current interest rates and compare them to your existing rate before deciding to refinance.
  • A new appraisal may be required to prove that your home's value meets the threshold for PMI removal.
  • Building home equity through principal payments or making home improvements can be an alternative to refinancing.

By understanding the process and considering these factors, you can successfully remove PMI from your mortgage and save money in the long run. It's essential to consult with your lender and evaluate your situation to determine the best approach for removing PMI.

Things to Consider When Removing PMI

When it comes to removing private mortgage insurance (PMI), there are several factors you should consider to make an informed decision. Here are some key points to keep in mind:

Closing Costs:

If you choose to refinance to eliminate PMI, it's essential to consider the associated closing costs. Refinancing typically involves fees such as application fees, appraisal fees, and title insurance fees. Take time to assess these costs and determine if they outweigh the potential savings from getting rid of PMI.

Interest Rates:

Before deciding to refinance, it's crucial to compare your current interest rate with the rates available in the market. If the current interest rates are significantly lower than what you're currently paying, refinancing may not only help you eliminate PMI but also reduce your overall mortgage payments.


Calculate the potential savings you could achieve by eliminating PMI. Consider the monthly PMI payments you make and multiply that by the remaining time you expect to have PMI. This will give you an estimate of the savings you stand to gain by removing PMI.


If you opt for a reappraisal of your home to demonstrate increased value, remember that you may need to pay for a new appraisal. The appraisal will determine whether your home's value has surpassed the threshold required for PMI removal. Consider the appraisal cost against the potential savings from PMI elimination.

Home Equity:

Building home equity through principal payments or making home improvements can be an alternative to refinancing. By increasing your home's equity, you may reach the loan-to-value ratio necessary for automatic termination of PMI or qualify for PMI cancellation. Assess your options and evaluate the cost-effectiveness of building home equity versus refinancing.

By considering closing costs, interest rates, potential savings, appraisal expenses, and home equity, you can make an informed decision regarding removing PMI. Each situation is unique, so take the time to analyze your specific circumstances and choose the best option for your financial goals.


In conclusion, private mortgage insurance can be removed from your loan once certain conditions are met, such as achieving a certain level of equity in your home or requesting the lender. It's essential for homeowners to be aware of the specific criteria outlined in their loan agreement and to stay informed about regulation changes that may affect the timeline for PMI removal.

By staying proactive and keeping track of their home's value and equity, borrowers can work towards eliminating this additional cost from their monthly payments. Understanding when private mortgage insurance goes away is crucial for managing overall housing expenses and achieving long-term financial stability.

Homeowners are encouraged to consult with their lenders or financial advisors to ensure they are on track for PMI removal and explore all available options for

Termination of Conventional Mortgage Insurance
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