When Can I Drop PMI?

Private mortgage insurance is the monthly premium most lenders require on a conventional loan when the down payment is under 20%. It protects the lender, not you, and it is not meant to last the life of the loan. The federal Homeowners Protection Act ties its end to one ratio: your loan balance divided by the home's original value — the purchase price, or the appraisal at closing if that was lower. That ratio is called the loan-to-value, or LTV, and the Act names two lines on it.

At 80%, you can ask. Once the balance is at or under 80% of the original value, you can request in writing that the servicer cancel PMI. The Act lets them require a good payment history (typically no payment 30 days late in the last year or 60 days late in the last two), no second mortgage or other lien on the home, and, if they choose, an appraisal at your expense to confirm the value hasn't fallen. At 78%, it has to end. When the balance is scheduled to reach 78% of the original value, the servicer must cancel PMI on its own, as long as you are current on payments — no letter required. The gap between those two lines is months of premiums that nobody will refund, which is why the receipt prices them separately.

This page reads both months off your loan's original amortization schedule — the payment on a fixed-rate loan is set so that each month's principal is a little larger than the last, so the balance you'd have after any number of payments is known from the day you close. Today's balance is the scheduled balance after the payments you've made; if you've already paid extra principal, your real balance is lower and the dates are sooner. The calendar months are counted from this month forward.

Extra principal changes only one of the two dates. The automatic 78% termination is tied by law to the original schedule, so a lower actual balance doesn't move it. What extra does move is the request route: your real balance crosses 80% sooner, and the earlier you can ask, the fewer premiums you pay. The receipt keeps the two apart so the saving is attributed to the date it actually comes from.

A worked example

Take the defaults: a $400,000 home with a $380,000 loan (5% down) at 6.5% for 30 years, 18 payments in, paying $158 a month in PMI. The principal-and-interest payment is $2,401.86. The first payment put only $343.53 toward the balance; by now each one puts about $378.61 — the balance after 18 payments is $373,523.46, which is 93.4% of the original value. It reaches 80% ($320,000) at payment 124, which is 106 months from now — a little under nine years — and the PMI paid until then comes to $16,748. It reaches 78% ($312,000) at payment 135, 117 months from now: waiting for the automatic date instead of asking costs another $1,738, eleven more premiums.

Now add $500 a month of extra principal from today. The actual balance reaches 80% at payment 71 — 53 months from now instead of 106 — so the request route opens 53 months sooner and saves $8,374 in PMI. The automatic date does not move: it stays at payment 135, because the law reads the original schedule. The trade in full is $26,500 of extra principal paid sooner (which also shortens the loan and cuts its interest — the extra payment calculator prices that part) against $8,374 of premiums never billed and a letter to the servicer at month 71. Smaller extras move it less: $200 a month brings the 80% month to 76 months from now and saves $4,740; $100 a month brings it to 88 and saves $2,844.

Common questions

I have an FHA loan — does this apply to me? No. FHA loans carry MIP (mortgage insurance premium) under HUD's rules, not PMI under the Homeowners Protection Act, and on most FHA loans with less than 10% down the annual MIP lasts for the life of the loan — no 80% request, no 78% automatic end. This calculator is for conventional loans. The usual way off FHA mortgage insurance is refinancing into a conventional loan once you have about 20% equity, which is its own decision with its own closing costs; the refinance calculator prices the break-even.

My home has gone up in value — can that get PMI cancelled sooner? Sometimes. The dates here use the original value because that is what the Act measures against. Many servicers will also cancel on the strength of a new appraisal showing the balance at or under 80% (often 75%) of today's value, usually after two to five years of ownership. That is the lender's or investor's policy rather than the law, so the rules vary, and you pay for the appraisal — ask your servicer what their current-value rule is before ordering one.

Does paying extra principal change the automatic 78% date? No. The automatic termination is pinned to the original amortization schedule, so a lower actual balance doesn't move it. Extra moves the request route only — the month your real balance crosses 80%, when you can ask. The receipt shows both so the saving lands on the right date.

This is an estimate. Today's balance is the scheduled balance after the payments you entered, not a figure from your servicer; months are counted from the current month; the PMI figure is the one you typed and is assumed constant. The Homeowners Protection Act covers conventional loans on single-family principal residences closed on or after July 29, 1999; it does not cover FHA or VA loans, and lender-paid PMI has no cancellation to request. Your servicer's own disclosure of the cancellation date governs.