1. The Homeowners Protection Act of 1998
Federal law mandates that lenders automatically cancel PMI on conventional loans once your principal balance is scheduled to reach 78% of the original purchase value of the home, provided your payments are current. The termination date is based on the original amortization schedule, regardless of whether your property value has increased.
2. Requesting PMI Cancellation at 80% LTV
You do not have to wait for the automatic 78% threshold. Once your balance reaches 80% of the original home price, you can submit a written request to your lender to cancel PMI. You must have a good payment history (no payments 30 days late within the last year) and no second liens on the property.
3. Re-appraising due to Home Appreciation
If property values in your neighborhood have risen significantly, your current loan-to-value ratio might already be below 80% even if you haven't paid down the principal. You can contact your lender to request a new appraisal. If the appraisal confirms LTV is below 80% (or 75% if you've owned the home for less than five years), PMI can be legally removed early.
4. Refinancing to Eliminate PMI
If you have a high interest rate, refinancing into a new conventional mortgage with a balance below 80% LTV can remove PMI while simultaneously lowering your interest rate. Model this transition using our refinance break-even engine to check if closing costs offset the monthly insurance savings.