How to get rid of PMI: the three ways it ends, and when a refinance beats waiting

Exit one: you ask, at 80% loan-to-value

Under the Homeowners Protection Act you can request cancellation once your balance reaches 80% of the home's original value, meaning the purchase price or the appraisal at closing, whichever was lower. The request has to be in writing, the loan has to be current with a good payment history, and there can be no second lien. The servicer can require evidence the value hasn't dropped.

Two things speed this up. Extra principal payments count. And if you have improved the home or the market has moved, many servicers will accept a new appraisal showing 80% of current value, which in a McHenry County or Fox Valley market that has appreciated since 2020 can shave years off the schedule.

Exit two: it drops automatically at 78%

If you never ask, the servicer must cancel PMI when the balance is scheduled to hit 78% of original value, provided you are current. This is based on the original amortization schedule, not on what the house is worth today. On a 30-year loan with 5% down, that is roughly year eleven. There is also a midpoint rule: at the halfway point of the loan term, PMI ends regardless of value if you are current.

Exit three: refinance into a loan without it

If your home is worth enough that a new loan would be at or under 80% of today's value, a refinance removes PMI on day one. The question is whether the cost is worth it, and that depends on your current rate. Someone who bought in 2021 at 3% should almost never refinance to drop $150 of PMI; the rate increase would cost more than the insurance. Someone who bought in 2023 or 2024 at 7% or higher may find the refinance pays for itself twice: lower rate and no PMI.

FHA is different

FHA loans don't carry private mortgage insurance; they carry an FHA mortgage insurance premium, and the Homeowners Protection Act doesn't apply. On most FHA loans made since 2013 with less than 10% down, the premium lasts the life of the loan. The only exit is a refinance into a conventional loan once you have 20% equity, which is one of the most common refinances we close for first-time buyers three to five years in.

What a portfolio lender can do here

Because Home State Bank services its own portfolio loans, our servicing team can look at a current appraisal and a payment history and make a cancellation decision without routing the request through a national call center. For loans we've sold, we'll tell you exactly which servicer to write to and what to include. Either way, start by pulling your last statement and finding the original loan amount and property value; everything above starts from those two numbers.