You can cancel PMI once you have built enough equity in your home, but the process and timeline depend on your loan type and when you bought it

PMI (private mortgage insurance) is a monthly fee lenders require when you put down less than 20 percent on a conventional loan. It protects the lender if you stop paying, but it costs you — typically 0.5 to 1.5 percent of your loan amount per year. Once you reach 20 percent equity in your home, you can request cancellation. The exact rules depend on whether your loan is conventional, FHA, VA, or USDA, and when the loan was issued.

For conventional loans closed after July 2013, federal law requires your lender to cancel PMI automatically once you reach 22 percent equity through a combination of payments and home value increases. For loans closed before that date, you must request cancellation yourself once you hit 20 percent equity. FHA loans have different rules entirely — they require mortgage insurance for the life of the loan in most cases, though some older FHA loans can drop it. VA and USDA loans do not use PMI at all.

Key Takeaways

  • Conventional loans closed after July 2013 must cancel PMI automatically at 22 percent equity, but you can request it earlier once you reach 20 percent equity.
  • Conventional loans closed before July 2013 require you to request cancellation yourself; your lender will not cancel it automatically.
  • FHA loans require mortgage insurance for the full loan term in nearly all cases, even after you reach 20 percent equity.
  • Your equity grows through monthly payments and home appreciation; a home value increase can move you toward the cancellation threshold faster than payments alone.
  • You will need to contact your lender directly to request cancellation — there is no online form or third-party process.

How equity builds and when you can cancel

Equity is the difference between what your home is worth and what you still owe on the mortgage. When you put down 10 percent on a $300,000 home, you owe $270,000 and have $30,000 in equity — that is 10 percent. Each monthly payment reduces what you owe, building equity. If your home value rises, your equity rises too without any payment from you.

For cancellation purposes, most lenders calculate equity based on your original purchase price, not current market value, unless you request a reappraisal. This matters because it means you cannot rely on a hot real estate market to push you over the threshold — you have to actually pay down the loan. Once you reach 20 percent equity (or 22 percent for automatic cancellation on newer loans), you can move forward with cancellation.

Cancellation rules for conventional loans by closing date

If your conventional loan closed on or after July 29, 2013, your lender must cancel PMI automatically when you reach 22 percent equity through regular payments. You do not have to ask. However, you can request cancellation earlier — as soon as you reach 20 percent equity — if you meet other conditions: your loan must be in good standing (no missed payments in the past year), you must have paid the loan for at least two years, and you must have a current appraisal showing the home is worth enough to support cancellation.

If your conventional loan closed before July 29, 2013, automatic cancellation does not apply. You must contact your lender and request cancellation once you reach 20 percent equity. Your lender can require an appraisal at your expense (typically $300 to $600) to verify the home value. Some lenders will accept an automated valuation model (AVM) instead, which is cheaper or free, but they are not required to. Without a current appraisal or AVM, many lenders will deny your request.

FHA loans and mortgage insurance that does not go away

FHA loans work differently. If you put down less than 10 percent, you pay mortgage insurance for the life of the loan — you cannot cancel it. If you put down 10 percent or more, you can cancel the annual mortgage insurance premium (MIP) after 11 years of payments, but only if your loan was issued before June 3, 2013. Loans issued on or after that date require MIP for the full term, regardless of your down payment.

Because FHA insurance is baked into the loan and collected through your monthly payment, cancellation does not happen through a request to your lender the way it does with conventional PMI. Instead, you stop paying it automatically after the time threshold is met — if you are may be able to access. Check your loan documents or call your lender to confirm your loan date and whether you can cancel MIP.

Steps to request PMI cancellation on a conventional loan

Start by contacting your lender — the company that services your loan, which may not be the bank that originated it. Call the number on your mortgage statement. Ask to speak with someone about PMI cancellation and confirm your current loan balance and the equity you have built.

If you have reached 20 percent equity, ask what documentation your lender requires. Most will ask for proof that you have made on-time payments for at least two years (your payment history shows this) and a current appraisal or AVM. If your lender requires an appraisal, ask whether they will accept an AVM first — it is cheaper and faster. Some lenders will order the appraisal themselves and bill you; others will ask you to provide it.

Submit the required documents and wait. Processing typically takes two to four weeks. Your lender will send you written confirmation once PMI is cancelled, and your monthly payment will drop at the next billing cycle. Keep this confirmation letter for your records.

When a home appraisal is required and what it costs

Your lender can require a current appraisal to verify your home value before cancelling PMI. This is most common for loans closed before 2013 and for requests made before you reach 22 percent equity on newer loans. An appraisal costs $300 to $600 depending on your home size and location. You pay for it upfront, though some lenders will roll the cost into your loan or deduct it from your escrow account if you have one.

Before paying for an appraisal, ask your lender whether they will accept an automated valuation model (AVM) instead. An AVM uses public records and comparable sales to estimate your home value and costs little or nothing. Lenders are not required to accept an AVM, but many will, especially if your home is in an area with recent comparable sales. If your lender refuses an AVM and requires a full appraisal, get the appraisal order in writing so you know the exact cost before proceeding.

Refinancing as an alternative to cancellation

If you have built 20 percent equity but your lender is dragging out the cancellation process or demanding an expensive appraisal, refinancing may be faster. When you refinance, you take out a new loan to pay off the old one. If you refinance with 20 percent equity, you can get a conventional loan without PMI, and the new loan will not require mortgage insurance.

Refinancing has costs — closing costs typically run 2 to 5 percent of the loan amount — so it only makes sense if you plan to stay in the home long enough to recoup those costs through PMI savings. Use a refinance calculator to compare the cost of refinancing against the cost of keeping PMI for another year or two. Also ask your current lender for a final payoff quote before you shop for a refinance, because some lenders will waive the appraisal fee or speed up cancellation if they know you are considering leaving.

Frequently Asked Questions

Can I cancel PMI if I have missed a payment in the past year?

No. Most lenders require that your loan be in good standing with no missed payments in the past 12 months before they will cancel PMI. If you have missed a payment recently, wait until 12 months have passed since the missed payment and then request cancellation.

What if my home value has dropped since I bought it?

Your lender will use a current appraisal to determine your home value. If the appraisal comes in lower than your loan balance, you may not have 20 percent equity even if you have paid down the principal. In that case, you cannot cancel PMI until the home value recovers or you pay down the loan further.

Do I have to pay for the appraisal myself?

It depends on your lender. Some lenders order and pay for the appraisal themselves, then bill you or deduct it from escrow. Others require you to pay upfront. Ask your lender who pays before you agree to an appraisal. Always get the cost in writing.

Will my monthly payment go down immediately after PMI is cancelled?

No. Your lender will send you written confirmation of cancellation, and your payment will drop at your next billing cycle, which may be several weeks away. Do not assume the cancellation is complete until you see the reduced payment on your statement.

Can I cancel PMI on an FHA loan?

Only if your loan was issued before June 3, 2013 and you put down 10 percent or more. You can cancel the annual mortgage insurance premium after 11 years of payments. Loans issued after that date require mortgage insurance for the full loan term.