Whether you’ve recently bought your home (primary residence) or are considering it, you may be wondering about private mortgage insurance; specifically, you might want to know how long you need to pay for this mortgage insurance and how to get rid of PMI altogether.
The good news is, PMI can be remove after some conditions have been met. Cancelling PMI can be complex, but we’ll do our best to give you the “to the point” info you need. Basically, PMI can be cancelled in three ways we've outlined below.
How to Get Rid of PMI
Based on how much of your mortgage loan’s principal you have paid, you may request PMI cancellation.
- On the date the principal balance of your loan is first scheduled to reach 80% of the original value of the property (when you bought it), you can request PMI cancellation
- OR, on the date the principal balance of your loan actually reaches 80% of the original value of the property, you can request PMI cancellation
To remove PMI, or private mortgage insurance, you must have at least 20% equity in the home.
If a new appraisal is made on your home, based on the new current value, you may request PMI cancellation.
- If the current appraisal shows your home’s new loan-to-value ratio is 75% or less AND the loan is between two and five years in repayment, you can request PMI cancellation.
- If the current appraisal shows your home’s new loan-to-value ratio is 80% or less AND the loan is more than five years in repayment, you can request PMI cancellation.
Keep in mind, your lender will select the appraiser and you will be responsible for the cost regardless of the new appraised value.
Lenders are sometimes legally required to cancel PMI.
- Even if you never request for your PMI to be cancelled, if you have a specific loan type, your lender is required to cancel it on the date when your principal balance is first scheduled to reach 78% of your property’s original value.
- FHA mortgage insurance cannot be cancelled by the lender and would require borrower refinancing in order to remove private mortgage insurance.
Keep in mind additional conditions, such as a two-year good payment history, proof of property value (e.g., appraisal) and proof of adequate insurance (e.g., insurance binder) may apply, so these standards don’t apply to every single situation.
Still, this should give you a good idea of when your PMI will be cancelled. If you still have questions, contact your trusted loan professional for advice on your unique circumstances.