If you purchased a home with less than 20% down, your mortgage payments likely include private mortgage insurance (PMI).
This extra cost protects the lender and can add hundreds of dollars annually to your housing expenses.
The good news? You can remove PMI early, and in this guide, we’ll show you exactly how to do it, including a PMI removal letter template.
New homeowner? Learn your refinance options.What is PMI?
PMI is a type of insurance required on most conventional loans when the borrower puts down less than 20%. It’s designed to protect the lender in case you default on the loan.
Typically, PMI ranges from 0.5% to 1.5% of your original loan amount annually, depending on your loan size and credit score.
It’s paid monthly and listed separately on your mortgage statement. If you’re not sure whether you’re paying PMI, review your closing documents or contact your mortgage servicer.
Why does PMI exist in the first place?
PMI isn’t just a random fee—it’s a tool lenders use to reduce risk when a borrower puts down less than 20%. In the event of a default, PMI helps the lender recover potential losses.
While it allows many buyers to qualify for a mortgage sooner, it’s meant to be temporary. Homeowners are encouraged to remove PMI once they’ve built sufficient equity.
Does PMI ever go away automatically?
Yes—PMI doesn’t last forever. Under federal law, your lender must automatically cancel PMI when your mortgage balance reaches 78% of your home’s original value, as long as you’re current on payments.
But you don’t have to wait. You may be able to cancel PMI sooner and start saving each month.
How to remove PMI early
Want to eliminate PMI before automatic cancellation? You can, if you meet certain conditions.
Here’s how:
1. Reach 20% equity in your home
This usually happens by:
- Paying down your loan principal over time
- Home value appreciating
- Making extra payments toward your mortgage
Once you reach 80% loan-to-value (LTV)—meaning you’ve built up 20% equity—you can request PMI cancellation.
2. Maintain a strong payment history
Most lenders require:
- No late payments in the past 12 months
- No more than one late payment in the past 24 months
3. Submit a PMI removal request
You must make a formal, written request to your loan servicer.
We provide a PMI removal letter template below to simplify the process.
4. Get a home appraisal (if needed)
Your lender may require a new appraisal to verify that your home’s current value supports your 80% LTV claim.
Make sure the cost of the appraisal won’t outweigh your PMI savings.
Appraisal tips: To help boost your appraised value, complete any small repairs, declutter the space, and be ready to point out recent home improvements or upgrades.
Providing details about comparable homes in your neighborhood can also support a favorable result.
5. Ensure no second liens
Lenders won’t approve PMI cancellation if you have a second mortgage or home equity line of credit (HELOC) that impacts your total loan balance.
How to write a PMI removal letter
A clear and professional letter can speed up the cancellation process.
Here’s what to include in your request:
PMI removal letter template
[Your Name]
[Your Address]
[City, State ZIP Code]
[Loan Number]
[Date]
[Loan Servicer Name]
[Loan Servicer Address]
[City, State ZIP Code]
Subject: Request for Cancellation of Private Mortgage Insurance (PMI)
Dear [Loan Servicer Name],
I am writing to formally request the cancellation of private mortgage insurance (PMI) on my loan (Loan Number: [Your Loan Number]).
Based on my current mortgage balance and recent property valuation, my loan-to-value (LTV) ratio is now at or below 80%, meeting the criteria for PMI removal.
Please let me know what documents or steps are required to process this request. I am prepared to provide an appraisal, if necessary.
Thank you for your prompt attention to this matter.
Sincerely,
[Your Name]
Tip: Always send your letter via certified mail and keep a copy for your records.
Can refinancing remove PMI?
Yes—refinancing is another effective way to remove PMI, especially if your home has gained value or your credit score has improved.
When is refinancing a good option?
- Current mortgage rates are lower than when you purchased your home
- Your credit profile has improved
- Your home’s value has significantly increased
- You’re switching from an FHA loan (which has lifetime mortgage insurance) to a conventional loan
Consider the total cost
Before refinancing solely to remove PMI, calculate:
- Closing costs
- New loan terms
- Interest rate difference
- Break-even point (how long before the refinance pays off)
Our mortgage advisors can help you run the numbers and see if refinancing is the smarter option.
When should you remove PMI?
You should consider PMI removal when:
- You’ve reached 20% equity through regular payments or market appreciation
- You’re planning to stay in your home long enough to benefit from the savings
- You’re refinancing for better terms anyway
Canceling PMI early can free up hundreds of dollars a year—money that could be better used for savings, renovations, or paying off debt.
FAQ: PMI removal
Can I remove PMI if my home value increased?
Yes. If your home’s value has appreciated significantly, a new appraisal may show you’ve reached the 80% LTV threshold—even if your original loan balance hasn’t changed much.
Does PMI apply to FHA loans?
Not exactly. FHA loans include a different type of insurance called Mortgage Insurance Premium (MIP), which often lasts for the life of the loan unless you refinance into a conventional loan.
Is there a fee to cancel PMI?
Lenders typically don’t charge a fee to cancel PMI, but if an appraisal is required, you’ll likely be responsible for that cost.
Need help canceling PMI or refinancing?
Whether you want to remove PMI with a letter or explore refinancing options, our team at GO Mortgage is here to guide you through the process.
Talk to our experienced team today and find out how much you could save.
Still not sure which route is best? We’ll take a look at your current mortgage, your home’s value, and your long-term goals to help you choose the most cost-effective option for your situation.