PMI (Private Mortgage Insurance)

Insurance lenders require on conforming mortgages with under 20% down. Two cancellation paths: request at 80% LTV, or automatic on the scheduled 78% date.

Reviewed May 2026.

PMI is a monthly cost added to your mortgage payment when your down payment is less than 20%. It exists to protect the lender — not you — against default. Cost is typically 0.3–1.5% of the loan amount per year, divided into 12 monthly chunks. It does not apply to FHA loans (those have MIP, a different program with its own rules) or to VA loans (which have a one-time funding fee instead).

The Homeowners Protection Act sets two cancellation paths:

• Borrower-requested cancellation at 80% LTV: when the principal balance reaches 80% of the original purchase price (the lower of original price or appraised value at origination), you can submit a written cancellation request. The servicer must cancel if conditions are met — current on payments, no second lien, sometimes a fresh appraisal if you're claiming current market value rather than the original-price benchmark.

• Automatic termination at 78% LTV: PMI must terminate automatically on the date the loan was scheduled to reach 78% LTV based on the original amortization schedule, provided you're current on payments at that date.

Extra principal payments can let you cross the 80% threshold sooner and request cancellation earlier. They do not move up the automatic-termination date, which is tied to the original scheduled 78% date regardless of how fast you pay down. If you're close to 80% LTV from extras or appreciation, the action that saves you money is submitting a written cancellation request — not waiting for the scheduled date to arrive.

PayoffMath angle. PMI changes the payoff math: extras don't just save future interest, they can also accelerate the date you cross 80% LTV and request cancellation. The PMI savings often equal or exceed the interest savings on the same extras, especially in the first few years of the loan.

Why it matters. Two cancellation rules apply at the same time — borrower-requested at 80% and automatic at the scheduled 78% date. Extras only move the 80% date, not the 78% date. Knowing which threshold your situation crosses first decides whether you have to act.

Common mistake. Waiting for PMI to drop off automatically when you've crossed 80% LTV early through extras or appreciation. Auto-termination is tied to the original schedule, not your current balance — without a written request, you keep paying PMI until the scheduled 78% date.

Try the mortgage payoff calculator → — see exactly when extras push your balance below 80% of the original price so you can time the cancellation request.

Worked example

Example: $400,000 loan with PMI at 0.5% annually = $2,000/year, $167/month. An extra $300/month in principal pushes your actual balance to 80% LTV roughly 18 months earlier than the schedule. At that point, submit a written cancellation request — if the servicer's conditions are met, PMI ends, saving 18 × $167 = $3,000. Without the request, you wait for the scheduled 78% automatic-termination date and forfeit that savings.

See also

Sources and review

Reviewed May 2026. Glossary entries are plain-language definitions, not legal definitions. For account-specific rules, your loan documents control.

Definition by James L. Wu. Plain-language gloss, not a legal definition. For terms that show up in your loan paperwork, the governing language is in your loan documents. See the editorial policy for sourcing.