Private mortgage insurance (PMI) often feels like a penalty for not putting 20% down. It doesn’t protect you; it protects your lender if you stop paying.

Yet the bill shows up on your statement every month, adding hundreds of dollars a year. The good news is that, in most cases, you do not have to keep paying PMI forever.

PMI Basics

PMI is usually required on conventional mortgages when your down payment is under 20% of the home’s purchase price. The cost typically runs somewhere around 0.5% to 2% of the original loan balance per year and is added to your monthly payment. VA loans and some specialty programs don’t use PMI. FHA loans use a similar charge called a mortgage insurance premium (MIP), which follows different rules and is often harder to remove.

Know Your LTV

Every PMI rule revolves around one number: your loan-to-value ratio (LTV). LTV compares what you still owe to the property’s original value (usually the purchase price or the appraised value used at closing) . If you bought for $300,000 and still owe $240,000, your LTV is 80%. As you pay down principal—and sometimes as the home’s value increases—your LTV falls and your equity rises.

Automatic Cancellation

Federal law requires most lenders to cancel PMI automatically once your loan balance reaches 78% of the home’s original value, assuming you’re current on payments. On that same $300,000 home, automatic cancellation should kick in when your balance hits $234,000. Lenders use the original value, not today’s market price, unless you push for a new valuation. High-risk loans can have slightly different rules, but for many borrowers, this 78% mark is the default finish line.

Request Early Removal

You don’t have to wait for the 78% trigger. When your LTV falls to 80%, you generally have the right to ask your servicer to drop PMI. That means at $240,000 remaining on a $300,000 original value, you can send a written request.

Most lenders will want:

• A solid payment history (no recent late payments).

• No junior liens like a home equity loan that push effective LTV higher.

• Evidence that the property hasn’t dropped significantly in value, often via an appraisal you pay for.

Getting PMI removed a little earlier can easily save hundreds—or even thousands—of dollars over the remaining life of the loan.

Jack Guttentag, a mortgage researcher, states, “Borrowers typically can’t terminate their mortgage insurance in the first two years after they have taken out their loan.” Before you pay for an appraisal or submit paperwork, it’s smart to confirm any timing rules your servicer applies to your loan.

Use Extra Payments

If you want to hit that 80% mark faster, extra principal payments are your best friend. Sending a bit more each month or making one extra full payment per year can shave years off your PMI timeline.

Be sure to:

• Tell your servicer in writing to apply extra funds to principal.

• Double-check that the online statement reflects those reductions.

• Keep your own simple spreadsheet or calculator to track projected PMI-removal dates.

Midpoint Termination

There’s also a final safety valve: PMI should end automatically at the midpoint of your loan’s term, even if your LTV hasn’t reached 78%. On a 30-year mortgage, that midpoint is year 15 of your original schedule. This rule is helpful if you had interest-only years, a balloon structure, or a period of forbearance that slowed your equity build but you’ve since returned to good standing.

Refinancing Away PMI

Refinancing shouldn’t be done just to dump PMI, but it can be a great side benefit if you’re refinancing anyway. If interest rates are lower now, your credit score has improved, or your home value has jumped, a new conventional loan with at least 20% equity may have no PMI at all. A fresh appraisal might show that price appreciation alone pushed your equity above 20%, even if your current lender is still using the old value. Just remember to weigh closing costs, new loan terms and any rate changes against the savings from losing PMI.

When Lenders Say No

Sometimes a cancellation request is denied. Common reasons include:

• Recent late payments.

• A new second mortgage or line of credit secured by the home.

• A significant decline in property value.

If this happens, focus first on fixing the issue — catching up on payments, paying down other liens, or improving the property and trying again with a fresh appraisal after some time has passed.

FHA and Similar Fees

Not all mortgage insurance behaves like PMI on a conventional loan. FHA MIP and fees on some specialty programs follow their own rules and may last for the entire loan term, especially on low-down-payment FHA loans originated in recent years. In these cases, the only realistic way to remove the ongoing charge is often to refinance into a conventional mortgage once you’ve built enough equity and your credit profile qualifies.

Action Plan

To start moving toward a PMI-free payment:

1. Check your current balance and calculate your LTV using the original property value.

2. Look at your amortization schedule to see when you’ll naturally hit 80% and 78%.

3. Decide whether extra principal payments could reasonably pull those dates forward.

4. Set calendar reminders a few months before each milestone to prepare documentation and line up a possible appraisal.

Bottom Line

PMI can be a useful stepping stone to homeownership, but it’s not meant to be permanent. By understanding how LTV works, tracking your equity, and using tools like extra payments or smart refinancing, you can often drop PMI sooner and redirect that money toward savings or faster payoff.