How to Get Rid of PMI on a Conventional Loan

On a conventional loan, you can ask to drop PMI once your balance is scheduled to reach 80% of your home's original value, and if you're current, it ends on its own at 78%, or halfway through the loan at the latest. If your home has gained value, Fannie Mae and Freddie Mac rules can let you ask sooner.

If you're buying with less than 20% down, PMI can feel like a charge you'll carry for 30 years. On a conventional loan, it has an end date, and knowing it before you buy makes the payment easier to plan around.

What PMI Costs on a $700,000 Home

PMI, private mortgage insurance, protects the lender when you put less than 20% down, and it's usually part of your monthly payment.

Freddie Mac puts the typical cost at about $30 to $70 a month for every $100,000 you borrow.

Paying an extra $300 a month toward principal would move that request date up to about six years in. The real PMI number depends on your loan, and your Loan Estimate shows it.

If you want to see when PMI would come off on your price and down payment, I'll run it with you.

How to Get Rid of PMI, Step by Step

1. 1

   At closing

   Find Your Dates on the PMI Disclosure

   Your closing papers include a PMI disclosure with the first date you can ask to cancel. The math runs off your home's original value, which is the lower of the price you paid or the appraisal at the time.

2. 2

   At 80% of the original value

   Ask Your Servicer in Writing

   Once your balance reaches that point, on schedule or sooner with extra payments, you can ask your servicer to drop PMI. You'll need a good payment record, no second loan on the home, and possibly an appraisal showing the value hasn't dropped.

3. 3

   After two years

   Ask Based on What Your Home Is Worth Now

   On a Fannie Mae loan, you can ask based on today's value instead, once your balance is 75% of the current value or less between two and five years in, or 80% or less after five years. Your servicer orders the valuation. If Freddie Mac owns your loan, ask your servicer for its rules, which can also allow an earlier end.

4. 4

   At 78% of the original value

   Let It End on Its Own

   If you're current on payments, your servicer has to end PMI when your balance is scheduled to reach this point, with no fee to you.

5. 5

   Halfway through the loan

   The Last Stop

   If PMI hasn't ended by the midpoint, which is 15 years into a 30-year loan, it has to end the month after, as long as you're current.

What the New Executive Order Could Change About PMI

On October 22, an executive order directed the FHFA, the agency that oversees Fannie Mae and Freddie Mac, to have them set up a pilot that cancels mortgage insurance on its own once equity requirements are met. It also calls for cutting extra costs in the process, like appraisals.

It comes with limits. The pilot would only cover mortgages made after it starts, it happens only if the FHFA director decides it's in the public's interest and theirs, and the order sets no deadline. So nothing changes yet for loans that already exist, and the steps above are still the ones that apply.

Where People Get Stuck Dropping PMI

The automatic end follows your original payment schedule. If you've been paying extra, you can reach 80% early, but you still have to ask.

A late payment can hold things up. On a Fannie Mae loan, a request needs no payment 30 or more days late in the past year, and none 60 or more days late in the past two years.

A second loan on the home, like a HELOC, can block the request. And if the home is worth less than what you paid, a request based on the original value can be denied unless you pay the balance down further.

If you're still comparing loan types, I showed how two loans on the same house can land very differently each month. And if the down payment is the hard part, I wrote about three California programs a first-time buyer can stack.

When you're ready to look, you can browse homes for sale anytime, and there are more posts for first-time buyers whenever you want them.

Questions I Get About Getting Rid of PMI