How I Removed PMI From My Mortgage Early
Updated May 6, 2024 at 10:00 am
For the past six decades, roughly 38 million Americans have used private mortgage insurance (PMI) to secure financing on their homes. My husband and I joined that number in 2020 when we bought our first home in Massachusetts.
While PMI helped us buy our condo with a low down payment, it also came with a few downsides. The PMI added $70 to our monthly bill, and it doesn’t actually protect us—it reimburses the lender if we stop making payments on the loan.
This type of insurance is designed to expire when you pay off a certain amount of the loan, but there are ways to speed up the process. I recently got rid of PMI about 28 months ahead of schedule, saving us around $2,000. Here’s what I did to ditch private mortgage insurance and how you can do the same.
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Vault’s Viewpoint
- PMI is typically required when you take out a conventional conforming mortgage and put down less than 20%.
- Your loan servicer must automatically drop PMI when your mortgage balance reaches 78% of your home’s purchase price.
- It’s possible to cancel PMI in other cases, such as if your home value has increased.
How I Removed PMI From my Mortgage
Removing private mortgage insurance from my home loan was a pretty easy process. It involved sending a few emails and working with a real estate professional to determine the home’s value. And my husband and I did a little bit of prep work in the beginning. End to end, the process took about two weeks and cost $190. Here’s how we did it.
We tracked Our Home Equity
After saving for the purchase, we bought our property in 2020 for $360,000 with a 7% down payment. We occasionally checked property-value websites and noticed that our property value had jumped to $505,000 by January 2024.
“This has definitely become a trend,” says Jeremy Schachter, a branch manager at Fairway Independent Mortgage Corporation.
During the COVID-19 pandemic, he says, more people had the ability to live and work anywhere. Many of them moved to different areas to find cheaper housing or be near friends and family.
“So homeowners who bought within the past few years have seen their home appreciate drastically,” Schachter says.
We Crunched the Numbers
By law, your loan servicer must drop PMI when your mortgage balance is scheduled to reach 78% of the home’s purchase price. Our mortgage was scheduled to reach this threshold in July 2026.
Because our home value went up, our home equity increased too. We technically met the threshold to remove the mortgage insurance. “But when your home value appreciates, it’s truly up to your mortgage servicer and their rules on how to remove PMI,” Schachter says.
For instance, the loan servicer may set a lower LTV threshold than 78%. They may also need to keep the PMI on the loan for a certain period of time. This “seasoning period” usually lasts between one and two years after closing on the loan, Schachter noted.
I Called the Loan Servicer
Because the PMI removal process can vary with each lender and each mortgage, I called our loan servicer to ask about next steps. A specialist quickly emailed back and outlined their requirements. We could potentially remove PMI under these conditions:
- The home loan is in good standing
- We have a history of making on-time payments
- The loan has been seasoned at least two years
- The LTV ratio is 75% or less
To move forward, I’d need to submit a written request along with a check for $190, which would cover the cost of determining the property value.
I Gathered My Documents
My loan servicer didn’t have a standard form to request PMI cancellation, so I created one myself after researching “PMI cancellation letter.” It included my name, contact information and mortgage account number. It also included a statement that said I wanted to remove PMI early because I believed my home value had increased.
I also wrote the $190 check to pay for my home evaluation. My bank said it would order a broker’s price opinion (BPO), which allows a real estate professional to estimate the value. The estimate is supported by recent selling prices of comparable homes in the area.
I dropped the check and letter in the mail and waited for a response.
I Arranged a BPO Visit
An agent from the bank contacted me to arrange an in-person visit for the BPO. He came to our house and toured the property, taking multiple pictures of the interior, exterior, basement and accessory structures. He also asked about any upgrades we made to the property. The process took about half an hour.
A few days later, the agent sent us a report that included property value estimates for our home and six others within a one-mile radius. He estimated our home’s market value at $580,000—well above the amount we needed to remove PMI.
We Received a Decision
About a week later, the bank sent us a letter confirming it would remove our private mortgage insurance. We officially stopped paying this cost in March, which is 28 months ahead of schedule. This move is saving us $70 per month. But we’re also putting the extra $70 toward the principal each month, which will help us pay off the loan two years early and save nearly $12,800 in interest.
Is Removing PMI a Good Idea?
The quick answer is “yes.” PMI can add $30 to $70 to your monthly mortgage payment for every $100,000 you borrow. On a $400,000 home loan, for example, PMI could cost up to $280 per month.
“You can potentially save quite a bit of money if you proactively try to remove PMI ahead of time,” Schachter says.
First-time homebuyers are more likely to use PMI because they aren’t using sale proceeds from a previous home for the down payment. Just keep in mind PMI protects your lender (and not you) in the event you default on the home loan. So after you qualify for the mortgage, PMI isn’t doing you any favors.
Other Ways to Get Rid of PMI From a Mortgage
While it’s possible to request PMI removal when your home value naturally rises, there are other ways to go about it. Here are some options to explore:
- Wait until you qualify. Your loan servicer must drop PMI when your mortgage balance reaches 78% of your home’s purchase price—as long as your loan payments are current and you’re in good standing with the lender.
- Request PMI cancellation. Instead of waiting until your loan balance reaches 78% LTV, you have the right to ask your servicer to cancel PMI once the loan balance falls to 80% of the original value of the property.
- Pay down your mortgage early. If you have cash to spare, you can pay more toward the principal balance to reach the 80% LTV threshold ahead of schedule. You’ll build equity faster and can save money on interest in the process. “The caveat to this approach is: What else could you be doing with the money?” Schachter says. “For instance, with a low mortgage rate, could you earn more in the stock market?”
- Make home improvements. Projects like upgrading appliances, remodeling a room, refinishing floors and making energy-efficient improvements can all add value to your home. If you think you’ve built at least 20% equity, contact your loan servicer to ask for the PMI cancellation. Schachter recommends keeping receipts to support your request.
- Refinance your mortgage. If you’re thinking about refinancing, you can remove PMI if you’re close to the 20% equity mark. This option could make sense when mortgage rates are low.
Frequently Asked Questions
Can I Cancel My PMI?
Yes, you can ask your loan servicer to cancel PMI once your loan balance falls to 80% of the original home value. The loan servicer is required to do this when your balance reaches 78%.
Can I Cancel PMI if My Home Value Increases?
It depends on the loan servicer’s rules. If you think you have 20% equity because your home value increased, call your loan servicer and ask about the next steps. The company may have rules surrounding your LTV ratio, the seasoning period and how to determine the property value.
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