Private mortgage insurance, or PMI, is the monthly charge that shows up when you buy with less than 20% down on a conventional loan. It protects the lender, not you, which feels a little rude considering you are the one paying for it. The good news is that on a conventional loan, PMI does not have to last forever.
When PMI Comes off a Conventional Loan
Automatic removal
Under the federal Homeowners Protection Act, your servicer must end PMI automatically when your loan balance reaches 78% of the home's original value, as long as you are current on your payments. If you reach the midpoint of your loan term first, which is year 15 on a 30-year loan, PMI ends then.
Requesting removal at 80%
You do not have to wait for 78%. Once your balance reaches 80% of the home's original value, you can ask your servicer in writing to cancel PMI. Servicers generally look for a clean payment history, no second liens on the property, and confirmation that the home has not lost value.
Removal based on current value
If your home has appreciated, you may be closer to 20% equity than your original loan schedule suggests. Conventional loans can generally be removed once you are at 80% on the original contact price or 78% of the current market value. These requests usually involve a new appraisal, and policies vary by servicer, so ask yours what it requires. Significant improvements, like a finished ADU or a remodeled kitchen, can change the math too.
Refinancing
Refinancing into a new conventional loan with at least 20% equity removes PMI, because the new loan is based on a new appraisal. Whether that makes sense depends on your current rate, the cost of the refinance, and how long you plan to stay in the home. It is worth running the numbers before you decide, not after. You can read more on our refinancing page.
What about FHA loans?
FHA mortgage insurance is permanent, lasting the life of the loan. The way out is to refinance into a conventional loan once you have enough equity, usually 20% to avoid PMI altogether. If you bought with an FHA loan a few years back, your equity may be further along than you think. That is worth a look.
Before you call your servicer
One term before we go further: your servicer is the company you send your payment to each month. That is often not the company that originated your loan.
Your original home value (the purchase price or appraised value when you bought)
Your current loan balance
Your payment history for the last 24 months
Whether you have a second mortgage or HELOC on the home
A rough idea of what your home is worth today
Not sure where you stand?
Your servicer makes the final call on PMI removal, but you do not have to sort through the options alone. Andy starts by understanding your situation and what you are trying to accomplish, whether that is a lower monthly payment, a refinance, or simply knowing when PMI will drop off. From there, you can see which path fits best. Call 541-420-2625 or send a message through the contact page.
This article is for general education and is not financial advice. Loan guidelines change.
Andy Zook NMLS-147460 | A2Z Home Loans NMLS-2440932