Understanding PMI: Requirements and Removal Strategies

If you’ve ever shopped for a mortgage with less than 20% down, you’ve probably run into private mortgage insurance (PMI). The good news is that PMI is usually temporary on conventional loans, and once you understand the rules, you can make smarter choices about how you pay it and how you get rid of it.

Below is a clear guide to what PMI is, the common PMI types (monthly, lender-paid, single premium, split premium), when it’s required, how it differs from FHA mortgage insurance, and the real-world ways homeowners remove it.

What is PMI?

PMI is an insurance policy that protects the lender (not the homeowner) if the borrower defaults. It typically shows up on conventional loans when the down payment is less than 20%.

Think of PMI as the tradeoff that allows a buyer to purchase sooner with a smaller down payment.

When is PMI required?

Most commonly, PMI is required when:

You are using a conventional loan
Your down payment is less than 20% (so the loan starts above 80% loan-to-value, or LTV)
The loan is not structured in a way that avoids monthly PMI (for example, lender-paid MI)

The exact PMI cost depends on factors like down payment, credit score, and loan structure. The key point for planning is that PMI rules are driven by LTV and by who owns or services your loan (Fannie Mae, Freddie Mac, or a portfolio investor).

The main types of PMI (and how they work)

Not all mortgage insurance is paid the same way. Here are the common structures you’ll see:

1) Borrower-Paid Monthly PMI (most common)

This is the classic version. PMI is added to your monthly mortgage payment until you reach the cancellation rules (more on that below).

2) Single Premium PMI (one-time PMI)

You pay a lump sum at closing (and in some cases it may be financed into the loan depending on the program). This can reduce or eliminate a monthly PMI payment, but it requires more cash upfront.

3) Split Premium PMI

A hybrid. You pay part upfront and the rest monthly. This can lower the monthly PMI amount without requiring as much upfront cash as a single premium.

4) Lender-Paid Mortgage Insurance (LPMI)

With LPMI, the lender “pays” the MI premium, but you typically pay for it through a higher interest rate. The big tradeoff is that because it’s baked into the rate, it generally does not drop off the way monthly borrower-paid PMI does. The typical way out is refinancing or paying off the loan.

Important nuance: The federal PMI cancellation and termination rules do not apply the same way to lender-paid MI.

PMI on conventional vs FHA mortgage insurance (MIP)

This is where many buyers get surprised.

Conventional (PMI)

Typically required when you put less than 20% down
Can usually be canceled when you reach the required equity thresholds (often request around 80% LTV and automatic around 78% LTV, with conditions)

FHA mortgage insurance (MIP)

FHA loans use Mortgage Insurance Premium (MIP), which is different from conventional PMI.

FHA typically has two components: an upfront premium and an annual premium that is paid monthly
The duration is based on your starting LTV and your loan term

FHA MIP duration (most common cases)

For many 30-year FHA loans:

If your starting LTV is 90% or less (often 10% or more down), the annual MIP lasts 11 years
If your starting LTV is above 90% (often less than 10% down), the annual MIP lasts for the mortgage term (often the full 30 years)

Because of that, many homeowners remove FHA mortgage insurance by refinancing to conventional once equity and credit support it.

Note: Older FHA loans can follow different mortgage insurance rules depending on when the FHA case number was assigned.

How to get rid of PMI on a conventional loan

For most homeowners, the goal is to remove PMI as soon as they’re eligible. There are a few key checkpoints, and understanding them can save you real money.

What “original value” means (this matters a lot)

When you see rules referencing “original value,” it generally means the home’s value at origination, usually the lesser of the purchase price or appraised value at closing. If you refinanced, “original value” is commonly tied to the appraised value used for that refinance.

Those 80% and 78% thresholds below are typically measured against that original value.

1) Request cancellation at 80% LTV (based on original value)

You generally have the right to ask your servicer to cancel PMI when your principal balance is scheduled to reach 80% of the home’s original value. In some cases, you may reach 80% sooner due to extra principal payments, but servicer rules still apply.

This is the version most people talk about: “PMI falls off at 80% LTV.” More precisely, you can request it around 80% if you meet requirements.

Simple example (how 80% works with 5% down)

Purchase price: $500,000
Down payment (5%): $25,000
Starting loan amount: $475,000 (95% LTV)

80% of the original value is $400,000. That means PMI request eligibility is typically when your principal balance reaches about $400,000 (assuming you meet your servicer’s conditions).

Property type can change the rules

The familiar 80% request and 78% automatic framework is most common for one-unit primary residences (and often second homes), but investment properties and 2 to 4 unit homes can require more equity before PMI can be removed. If your property is not a one-unit primary residence, confirm the exact thresholds with your servicer.

2) Automatic termination at 78% LTV (based on original value)

If you don’t request cancellation, PMI is generally required to terminate automatically when the loan is scheduled to reach 78% of the original value, as long as the loan is current.

3) The midpoint termination rule (commonly missed)

There is also a “final termination” concept tied to the midpoint of the amortization schedule in certain scenarios. In plain English, if PMI has not ended earlier under the standard LTV-based rules, it may be required to terminate at the midpoint of the loan’s amortization schedule.

For a 30-year loan, the midpoint is typically after 15 years. This comes up more often with loan features that slow down principal paydown (like interest-only periods, principal forbearance, or balloon structures). If you’re approaching the halfway point of your loan term, ask your servicer what termination date applies to your loan.

Common requirements that can affect timing

Servicers can require that:

You’re current on payments
You have an acceptable payment history
The home value has not declined
There are no problematic subordinate liens (like certain second mortgages or HELOCs)

What if your home value increased?

This is one of the most common questions we get, and the honest answer is: sometimes, but it depends on investor and servicer guidelines.

Appreciation-based PMI removal may be possible, but there are rules

Many conventional loans allow PMI cancellation based on current value, but it often requires:

A borrower-initiated request (you have to ask)
A valuation or appraisal that meets the servicer’s standards (some accept automated valuations, some require a BPO, and some require a full appraisal)
Seasoning and LTV requirements (often stricter early on, sometimes requiring 75% LTV or lower depending on how long you’ve owned the home and whether improvements were made)

In other words, if you bought with 5% down and your home appreciated quickly, you might not be required to refinance, but you may need enough time since closing plus sufficient appreciation and an acceptable valuation method.

Do all servicers offer an appraisal option?

Not always. Some servicers will process an appraisal-based request, while others may be more restrictive depending on who owns the loan and internal policy.

If your servicer does not allow early removal based on current value, then your main alternatives are:

Wait until you hit the 80% LTV point based on original value
Pay the balance down faster with extra principal payments
Refinance into a new loan without PMI (assuming you qualify and the math makes sense)

How to request PMI removal (quick checklist)

If you think you’re close to eligibility, here’s the playbook:

Call your servicer and ask what they require to process PMI cancellation
- Do they use an automated valuation, BPO, or full appraisal?
Confirm you are current and ask if there are payment history requirements
- Some servicers require a clean recent payment record
Confirm whether a second lien (HELOC or second mortgage) impacts eligibility
Submit the request and ask for the decision in writing
- If approved, confirm the effective date
If denied, ask what condition was not met
- Value, LTV threshold, seasoning, payment history, or lien position
- Then ask what would satisfy it

Tip: Your PMI disclosure often lists the first date your balance is scheduled to reach the 80% threshold. If you don’t have it, your servicer can provide that scheduled date.

Bottom line

Conventional PMI is usually removable, often starting with a request at 80% LTV based on the original value, with automatic termination at 78% if you stay current.
FHA MIP plays by different rules and may last 11 years or the full loan term depending on your starting LTV and term, with many borrowers ultimately removing it via refinance.
If your home value jumped, an appraisal-based PMI removal might be possible on some conventional loans, but it depends on your servicer and investor guidelines and may require seasoning plus a valuation.
Refinancing can also remove mortgage insurance in the right scenario, and this route can make sense if you’re not eligible for cancellation yet, your servicer won’t accept an appraisal-based request, or you’re looking to adjust your rate, term, or cash flow at the same time. We’ll help you determine if the monthly savings outweigh the refinance closing costs and that the break-even timeline fits your plans.

Want help figuring out your fastest path to removing PMI?

If you send us a few basics, we’ll map out the cleanest option and timeline:

Purchase price (or refi year and appraised value at that time)
Estimated current home value
Current loan balance
Property type (primary, second home, investment, and number of units)

We’ll help you confirm whether you’re best off waiting for the scheduled 80% date, making extra principal payments, requesting an appraisal-based cancellation, or refinancing to remove mortgage insurance sooner.