When Does PMI Actually Drop Off?

Private mortgage insurance feels like one of those costs that will just disappear "eventually," right? The truth is, when it disappears depends on your loan type, your equity, and whether you take action or just wait for it to happen on its own. Here is exactly how it works.

Conventional Loans: Two Ways PMI Goes Away

PMI on a conventional loan is governed by a federal law called the Homeowners Protection Act, and it gives you two paths off of it.

Automatic termination at 78% LTV. Once your loan balance reaches 78% of your home's original value, your servicer is required to cancel PMI automatically, as long as you are current on payments. You do not have to ask. This is the floor.

Borrower-requested cancellation at 80% LTV. You do not have to wait for the automatic date. Once your balance reaches 80% of the original value, you can submit a written request to your servicer to drop PMI sooner, as long as you have no 30-day late payments in the past year and no second lien on the property.

Using home appreciation instead of paydown. If your home's value has gone up rather than your balance simply going down, you can sometimes request cancellation earlier using a new appraisal, typically requiring 25% equity if it has been less than two years since closing, or 20% equity after five years. A professional appraisal usually runs $300 to $600, and if you have made documented improvements, cancellation can be requested at 20% equity right away.

The midpoint safety net. Even if none of the above happens, PMI must be terminated by the midpoint of your loan term. On a standard 30-year mortgage, that means PMI is gone by month 180 at the latest, no matter what.

FHA Loans Play by Completely Different Rules

This is the part that catches a lot of FHA borrowers off guard. FHA mortgage insurance, called MIP, does not work like conventional PMI, and you cannot simply request its removal the way you can on a conventional loan.

If your down payment was 10% or more, MIP automatically terminates after 11 years.

If your down payment was less than 10%, MIP stays for the life of the loan, full stop, unless you refinance.

For most FHA borrowers, the only realistic way to get rid of mortgage insurance sooner is to refinance into a conventional loan once you have built enough equity, typically 20% or more.

Why This Difference Matters When You Choose a Loan Program

If eliminating mortgage insurance as fast as possible matters to you, that is a real factor in choosing between FHA and Conventional from day one, not just something to think about later. A slightly higher rate on a conventional loan can still cost less over time than years of FHA MIP with no way to remove it early.

What to Do If You Think You Are Close

Check your original purchase price and current balance. If you are near 80% LTV, it may be time to request cancellation in writing rather than waiting for the automatic date.

Ask about an appraisal-based request if your home's value has risen faster than your loan has paid down.

If you have an FHA loan with less than 10% down, ask your Loan Officer to run the numbers on whether refinancing into a conventional loan makes sense once you have the equity.

As a Mortgage Broker, Quazel can review your current loan and tell you exactly how close you are to dropping mortgage insurance, and whether a refinance would get you there faster than waiting.

Expect to close one week early.

Frequently Asked Questions

At what percentage does PMI automatically go away?

PMI is required to be automatically canceled once your loan balance reaches 78% of the home's original value, as long as you are current on your payments.

Can I remove PMI before I hit 80% equity?

Not through the standard borrower-requested path. However, if your home's value has appreciated, you may be able to request cancellation earlier using a new appraisal.

Does FHA mortgage insurance work the same as PMI?

No. FHA MIP only automatically terminates after 11 years if your original down payment was 10% or more. With less than 10% down, MIP lasts for the life of the loan unless you refinance.

How do I actually request PMI cancellation?

Submit a written request to your loan servicer once you have reached 80% loan-to-value, with a current payment history and no additional liens on the property.