PMI Removal Guide: How to Ditch Private Mortgage Insurance

If you bought a house in the US with less than 20% down, you are likely paying PMI (Private Mortgage Insurance). It's one of the most hated fees in finance. Why? Because you pay the premium, but the policy protects the bank, not you. If you default, PMI pays the lender. You get nothing.

Depending on your loan size and credit score, PMI can cost anywhere from $50 to $400 per month. That's money that could be going into your 401(k) or your principal balance.

Here is the definitive guide to killing PMI in 2025.

Key Takeaways

• The Magic Number: 80% Loan-to-Value (LTV). Once you owe less than 80% of the home's value, PMI can usually be removed.
• Automatic Termination: By law (Homeowners Protection Act), it must drop off at 78% LTV based on the original schedule.
• Appreciation counts: If your home value skyrocketed, you might be at 80% LTV today, even if you haven't paid down much principal.
• FHA Exception: Most modern FHA loans require MIP (the FHA version of PMI) for the life of the loan. You must refinance to get rid of it.

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1. Conventional Loans: The Request Process

For conventional loans (Fannie Mae / Freddie Mac), you don't have to wait for the automatic termination at 78%. You can request cancellation at 80%.

Step 1: Check your LTV

$$LTV = \frac{\text{Current Loan Balance}}{\text{Home Value}}$$

Example:

• Loan Balance: $380,000
• Zillow/Redfin Estimate: $500,000
• LTV = 380,000 / 500,000 = 0.76 (76%).

You are under 80%! You are ready.

Step 2: Contact your Servicer

Call the number on your mortgage statement. Tell them: "I believe my LTV is below 80% due to market appreciation/payments and I want to request PMI cancellation."

Step 3: The Appraisal

The bank won't trust Zillow. They will order an appraisal (usually costs you ~$450-$600) or a BPO (Broker Price Opinion, cheaper).

• Risk: If the appraisal comes in low, you wasted the fee and keep PMI.
• Reward: If it comes in high, you save hundreds per month forever.

💡 Check your numbers: Use our Mortgage Calculator to see your amortization schedule and predict when you'll hit 80% naturally.

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2. The FHA Trap: MIP

If you have an FHA loan originated after 2013 with less than 10% down, you have MIP (Mortgage Insurance Premium). Unlike PMI, MIP never goes away, even if you pay off 99% of the house.

The Only Solution: Refinance into a Conventional Loan.

1. You must have 20% equity (so you don't just trade FHA MIP for Conventional PMI).
2. You must qualify for a conventional loan (Credit score usually 620+).
3. Interest rates matter. If you have a 3% FHA rate and refinance to a 7% Conventional rate to save $100 in MIP, you might pay $500 more in interest. Do the math.

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3. "Piggyback" Loans: How to Avoid PMI from Day 1

If you are buying a home now and don't have 20% down, consider an 80-10-10 loan.

• 80% First Mortgage (Conventional, no PMI).
• 10% Second Mortgage (HELOC or Fixed, higher rate).
• 10% Your Cash Down Payment.

Why do this? Often, the interest on the small second mortgage is cheaper than the PMI premium. Plus, mortgage interest is tax-deductible (up to limits), while PMI often is not (tax laws vary).

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4. Conclusion

PMI is "wasted rent" on a home you own.

1. If you have a Conventional loan, track your LTV religiously. The moment it hits 80%, trigger the appraisal.
2. If you have an FHA loan, watch interest rates. If rates drop and your equity rises, refinance immediately to escape the MIP trap.

Don't pay for the bank's peace of mind a day longer than necessary.

👉 See when your PMI drops off