When does PMI go away?

The three federal rules

The Homeowners Protection Act of 1998 sets the minimum standards for ending borrower-paid PMI on a mortgage for a primary home closed on or after July 29, 1999. It measures everything against the original value: generally the lower of the purchase price or the appraised value when you bought.

• Request at 80%. You can ask in writing to cancel PMI when your balance reaches 80% of the original value, either on the original payment schedule or sooner if you have paid extra. The servicer must agree if you have a good payment history, are current, have no second mortgage or other junior lien, and, if asked, show that the home's value has not fallen below the original value (for example, with an appraisal or a valuation the servicer orders).
• Automatic at 78%. PMI ends without a request on the date the balance is scheduled to reach 78% of the original value, as long as you are current. This date follows the original schedule, so extra payments do not move it.
• Final termination at the midpoint. If neither has happened, PMI must end the month after the loan reaches the middle of its amortization period (after 15 years on a 30-year loan), if you are current.

Loans owned by Fannie Mae or Freddie Mac may follow their own rules, but those cannot be less favorable to you than the law. Lender-paid mortgage insurance, where the cost is built into a higher interest rate, is not cancelled under these rules; refinancing is usually the only way out of it.

How long it takes at today's rate

On a $360,000 home, close to the U.S. median value, with a 30-year fixed loan at 7.24%, the balance falls slowly at first because most of each early payment is interest. A smaller down payment means a longer wait and more PMI paid:

PMI at the published rate for a 740 to 759 credit score, which falls as the down payment grows: 0.48% of the loan a year with 5% down, 0.38% of the loan a year with 10% down, 0.20% of the loan a year with 15% down. These rates assume 25% mortgage insurance coverage, the level Fannie Mae requires on HomeReady loans and the one Urban Institute publishes. A standard conventional loan with less than 10% down needs 30% to 35% coverage, which typically costs up to about a third of a percentage point more a year. Months count payments made.

Asking at 80% instead of waiting for 78% saves about 1 year 3 months of PMI with 10% down, worth roughly $1,539. With 5% down the wait to 78% is 12 years 1 month; with 15% down it is 6 years 10 months. All three reach 78% before the 15-year midpoint, which mainly matters for loans that pay down very slowly.

Your credit score moves the monthly cost more than the timing: at 96.5% loan-to-value, typical borrower-paid PMI runs from about 0.46% of the loan a year for a score of 760 or higher to 1.5% for 620 to 639.

Extra payments bring the 80% date forward

Because the 80% request can be based on your actual balance, any extra principal you pay counts. With 10% down on the same loan:

Extra principal paid every month from the first payment. The automatic 78% date does not move, so you need to request cancellation in writing.

An extra $100 a month ends PMI about 1 year 11 months sooner, and $300 about 3 years 11 months sooner, on top of the interest those payments save. A single lump sum works the same way: once the balance is at 80% of the original value, you can ask. The amortization calculator shows the balance month by month.

Removing PMI with a new appraisal

If your home has gained value, or you have added value with major improvements, the loan owner may let you cancel based on today's value rather than the original one. Federal law does not require this, so the rules come from whoever owns your loan. Fannie Mae's, for a one-unit primary home or second home:

• Loan at least 2 years old and up to 5: balance at or below 75% of the current value.
• More than 5 years old: balance at or below 80% of the current value.
• Documented substantial improvements, such as a kitchen remodel or added square footage: 80%, with the two-year wait waived. Routine repairs do not count.
• No payment 30 or more days late in the past 12 months, and none 60 or more days late in the past 24 months.

In the 10%-down example, the balance after two years is about $317,481. Getting under 75% would take a value of about $423,308, 18% above the purchase price. Just past five years the balance is about $305,393, and 80% needs a value of only $381,741, up about 6%. Ask your servicer which apply and what valuation it orders before paying for one.

FHA mortgage insurance is different

The Homeowners Protection Act does not cover FHA loans. FHA charges an upfront premium of 1.75% of the loan, usually added to the balance, plus an annual premium paid monthly. How long the annual premium lasts depends on the loan-to-value ratio when you borrow (a rule in place since June 2013); the current premium rates apply to loans endorsed since March 20, 2023:

30-year FHA loan on a $360,000 home; monthly premium shown for the first year, based on the base loan.

With the minimum 3.5% down, the premium of about $159 a month does not end at any balance; the usual way to drop it is refinancing into a conventional loan once you have about 20% equity. With 10% down it stops after 11 years. A conventional loan with the same 10% down would have ended PMI after about 9 years 10 months at today's rate.

PMI is one reason the down payment matters when you set a budget; the home affordability guide shows how it changes the price you can afford. Property tax and insurance in the examples use the national averages of 0.89% of value and $4.29 per $1,000 a year.