Home Purchasing

How To Get Rid of Private Mortgage Insurance

Tired of paying private mortgage insurance premiums? While PMI may have been a good thing at first—helping you to purchase a home that would have otherwise been out of reach—it starts to add up over time, and you may be wondering if you can stop paying those monthly premiums. Good news: you may be able to get rid of PMI, and may be even easier than you think! Here’s how to get rid of mortgage insurance.

Get Familiar with Your LTV

Do you know your loan to value ratio, or LTV? This is the main deciding factor if you’re trying to get rid of mortgage insurance. Luckily, the more mortgage payments you make, the lower your LTV will be—and lower is better when it comes to your loan to value ratio.

Many new homebuyers start out with a high LTV. Perhaps you made a down payment of 5 or 10% on your home—in that case, your LTV started out at 95 or 90%, respectively. As you build equity by making your monthly mortgage payments, you lower your LTV. Your goal is to get the LTV to 80%. At that point, you can apply to cancel your mortgage insurance.

Cancel Your Mortgage Insurance at 80% LTV

When you pay off enough of your mortgage loan that your loan to value ratio reaches 80%, you can ask your lender to cancel PMI. As long as you meet your lender’s requirements, you’re in good shape and you can stop paying those mortgage insurance premiums!

There are a few ways to get to 80% LTV if you’re not there yet:

  • Prepay your mortgage principal so you can reach 80% LTV more quickly
  • If your home has risen in value (whether through market changes or significant home improvements), get it appraised and see if it lowers your LTV

Note: If you have a government loan (like an FHA loan), you unfortunately cannot cancel your mortgage insurance or MIP—you’ll have to pay it for the life of the loan. However, it may be possible to refinance and switch to a conventional loan as long as your LTV and credit score are in good shape.

Wait for Automatic Cancellation

Let’s say you don’t cancel your mortgage insurance at 80% LTV. That’s OK! When your LTV reaches 78%, it’ll be automatically cancelled. Note that this automatic PMI cancellation is only for conventional loans, not FHA loans.