Buy a home with less than 20 percent down on a conventional mortgage and your lender almost certainly required private mortgage insurance, a monthly charge folded into your payment that protects the lender, not you, if the loan goes bad. What many borrowers never learn is that the charge comes with a legal expiration date. A federal law called the Homeowners Protection Act spells out exactly when you can demand that PMI be removed and when the lender must drop it on its own, as the Consumer Financial Protection Bureau explains.
Because the premium recurs every month for years, the total cost is real money, and every month you carry PMI past the point where the law lets you cancel is a month of pure waste. This piece walks through the three exit points, the fine print attached to each, and the different rules that apply if your loan is FHA rather than conventional.
What PMI is, and what it is not
Private mortgage insurance is the lender’s safety net. If you stop paying and the house sells for less than the loan balance, the insurer covers part of the lender’s loss. You pay the premium, but you are not the beneficiary. The CFPB’s plain-language explainer notes that PMI is typically arranged by the lender on conventional loans with down payments under 20 percent, and it is usually added to your monthly mortgage payment, though some lenders offer upfront or lender-paid versions instead.
PMI does not protect you from foreclosure, does not pay your mortgage if you lose your job, and does not build any value for you. That is why the law gives you the right to shed it once the lender’s risk has fallen.
Exit one: request cancellation at 80 percent
The first door opens when your loan balance falls to 80 percent of the home’s original value, meaning the sales price or the appraised value when you closed, whichever the loan documents use. You can find the date your balance is scheduled to hit that mark on your loan’s amortization schedule, and you can get there sooner by making extra principal payments.
Cancellation at this point is not automatic. You must ask for it in writing, and the servicer can require a few things first: your request must be to a loan in good standing, you generally need a solid recent payment history, and the servicer may ask you to certify that there are no other liens on the home and to show that the value has not declined below its original level, which can mean paying for an appraisal or broker price opinion. The CFPB lays out these conditions on its PMI cancellation page. Meet them, and the servicer must cancel.
Exit two: automatic termination at 78 percent
If you never send the letter, the law still catches up. The servicer must terminate PMI automatically on the date your principal balance is first scheduled to reach 78 percent of the home’s original value, so long as you are current on payments. No request, no appraisal, no fee. If you are behind at that point, termination happens once you become current.
Note the word scheduled. The automatic trigger runs off the original amortization schedule, not your actual balance. If you have prepaid ahead of schedule, do not wait for the 78 percent date to arrive on its own; use the 80 percent written request instead and stop paying sooner.
Exit three: the midpoint backstop
There is a final safety valve for loans that amortize slowly. Even if the balance has not reached 78 percent of original value, PMI must end the month after you reach the midpoint of the loan’s amortization period, which is 15 years into a 30-year mortgage, provided you are current. This backstop matters most for borrowers with interest-only stretches or balloon features whose principal declines slowly in the early years.
FHA loans play by different rules
None of the above applies to FHA-insured mortgages. Those carry a government mortgage insurance premium, or MIP, with its own schedule set by the Department of Housing and Urban Development. For most FHA loans with a small down payment, the annual premium lasts for the life of the loan, and the practical way out is to refinance into a conventional mortgage once you have enough equity. HUD’s FHA loan pages describe how the agency’s insured mortgages work. If you are not sure which kind of loan you have, your servicer’s annual statement or your closing documents will say.
How to make the cancellation happen
Start with two numbers: your current principal balance, from your latest statement or your servicer’s portal, and your home’s original value, from your closing paperwork. Divide the first by the second. If you are at or below 80 percent, send the written cancellation request now and ask the servicer to spell out anything else it requires. If you are close, check whether a modest extra principal payment gets you across the line; one lump payment can end years of premiums.
Keep copies of everything, and watch your next two statements to confirm the charge is gone. If a servicer stalls or refuses without a reason the law allows, you can submit a complaint to the CFPB, which forwards it to the company and tracks the response. The right to cancel is written into federal law. The only part left to you is asking.
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