You can remove Private Mortgage Insurance (PMI) when your loan-to-value ratio reaches 78% (automatic) or 80% (by request) on conventional loans. On FHA loans, MIP typically stays for the life of the loan unless you put 10% or more down. PMI removal can save you $100 to $300 per month.
The key is knowing your current loan-to-value ratio and taking action. Many homeowners wait for automatic removal and miss months of savings they could have claimed by requesting early removal.
When PMI Drops Off
On conventional loans, PMI drops off automatically when your loan balance reaches 78% of the original purchase price. You can request early removal when your balance reaches 80% of the original value. For early removal, you typically need a new appraisal to show the current value, especially if appreciation has helped you reach the threshold faster.
How to Request Early Removal
To request early PMI removal, contact your lender or servicer in writing. You will need a current appraisal showing your loan-to-value ratio is 80% or lower. You must be current on your payments and have a good payment history. Once approved, PMI stops within 30 days.
FHA vs Conventional PMI Rules
This is the most important distinction. FHA loans with less than 10% down require MIP for the life of the loan. Conventional loans with PMI allow removal at 80% LTV. If you have an FHA loan with lifetime MIP, the only way to eliminate mortgage insurance is to refinance to a conventional loan once you have 20% equity.
How to Reach 80% LTV Faster
- Make extra principal payments: Even $50 extra per month accelerates your equity build.
- Home appreciation: If your home value has increased, a new appraisal may show you have 20% equity even without paying down much.
- Home improvements: Strategic renovations that increase your home's value can push you over the 20% threshold.
Cost Savings from PMI Removal
PMI typically costs 0.3% to 1.5% of your loan amount per year. On a $250K loan, that is $750 to $3,750 per year or $62 to $312 per month. Removing PMI is essentially giving yourself a raise. Over the remaining life of your mortgage, PMI removal can save you tens of thousands of dollars.
