How to Get Rid of PMI: Equity, Reappraisal, and Refinancing

Private mortgage insurance (PMI) on a conventional loan cancels automatically once your balance reaches 78% of the home's original value, but you don't have to wait that long. You can request removal at 20% equity, and if your home has appreciated, a reappraisal or refinance can eliminate it even sooner.

The automatic cancellation you're entitled to

Under federal PMI cancellation rules, your lender must automatically cancel PMI once your loan balance reaches 78% of the home's original purchase value, meaning you've built 22% equity through your regular payments. This happens without you doing anything. But automatic cancellation is the slowest path, and there are faster ones worth knowing, since PMI is a cost that protects the lender, not you.

Requesting cancellation at 20% equity

You don't have to wait for the 78% automatic trigger. Once you reach 20% equity (an 80% loan-to-value ratio) based on the original value, you can request cancellation in writing. You'll typically need a good payment history and, in some cases, a current appraisal to confirm the value hasn't dropped. This gets PMI off your payment months earlier than waiting for automatic termination.

Using appreciation: the reappraisal route

Here's the path most homeowners miss. If your home has gone up in value, or you've made improvements, a new appraisal may show you've crossed the 20% equity threshold based on the current value, not just what you've paid down. In a rising market, this can eliminate PMI far sooner than your payment schedule alone would. Lenders have rules about how long you must have held the loan for this to apply, often around two years, so ask about the specific requirement.

Refinancing PMI away

If you now have 20% or more equity, refinancing into a new loan without PMI removes it entirely. This makes the most sense when current rates are favorable, since you're paying closing costs to do it. Run the break-even math on a refinance first, if the rate and costs work in your favor, it's a clean way to drop PMI and possibly lower your rate at the same time.

The FHA exception you need to understand

Everything above applies to conventional PMI. FHA loans carry a different charge (MIP), and on most FHA loans with less than 10% down, it lasts the life of the loan, it does not cancel at 20% equity. The only way to remove FHA MIP is to refinance into a conventional loan once you have enough equity. This is one of the biggest long-term differences between FHA and conventional financing, and a major reason many FHA buyers refinance to conventional down the road.

Dropping PMI comes down to your loan-to-value, so run your equity against your balance with our mortgage calculators, and see our mortgage basics guide for the fundamentals behind equity and PMI.