When Does PMI Drop Off? The 78% Rule Explained
Quick answer
Under the US Homeowners Protection Act, your lender must cancel private mortgage insurance (PMI) automatically once your loan balance is scheduled to reach 78% of the home's original value, as long as your payments are up to date. You can ask for it to be cancelled sooner, once the balance reaches 80% of the original value. On a $270,000 loan (10% down on a $300,000 home) at 7% over 30 years, that's roughly 8.4 years for the 80% request point and 9.6 years for the automatic 78% cut-off.
Private mortgage insurance protects your lender, not you, and it's added automatically whenever the down payment is under 20%. The good news is that it doesn't last forever. US federal law sets out exactly when it has to end, and you don't have to sit and wait for your servicer to get round to it.
Three separate rules decide when PMI comes off a conventional loan, and each one gives a different date. Knowing all three, and which applies to your loan, can be the difference between paying PMI for years longer than you need to and ending it the moment you're entitled to.
Three ways PMI ends, not one
The Homeowners Protection Act of 1998 covers PMI on conventional mortgages for a main home, and it sets out three separate triggers.
Each one is measured against the "original value", meaning the purchase price or the appraisal when you bought, whichever was lower. It isn't today's market value, and it isn't a refinance appraisal unless the loan itself was refinanced.
- Cancellation you ask for at 80% of original value. Once your scheduled balance reaches 80% of what the home was worth when you bought it, you can ask your servicer in writing, as long as you're up to date on payments and have no second mortgage or other lien behind it.
- Automatic cancellation at 78% of original value. Even if you never ask, the servicer has to cancel PMI once the balance is scheduled to reach 78%, provided your payments are up to date.
- Automatic cancellation at the halfway point of the loan. Whatever the balance, PMI has to end the month after you reach the midpoint of the original repayment schedule (year 15 of a 30-year loan). This mostly matters for loans with interest-only periods, paused principal payments or a balloon payment, where the balance might not have reached 78% on its own by then.
How the dates work out on a real loan
Say you buy a $300,000 home with 10% down. That's a $270,000 loan at 7% over 30 years, with a monthly principal-and-interest payment of $1,796.
80% of the $300,000 original value is $240,000. On the normal repayment schedule, the balance gets there at month 101, about 8.4 years in, and that's the earliest point a written request can succeed. 78% is $234,000, reached at month 115, roughly 9.6 years in, which is when PMI ends automatically if you haven't asked sooner. By month 180, the halfway point of the loan, the balance is already down to about $199,850, or 66.6% of the original value, well past both thresholds on an ordinary fixed-rate loan like this. The halfway rule is there for the smaller number of loans where that wouldn't happen on its own.
Put your loan amount, rate and term into the Mortgage Calculator and look at its amortization table to find the month your balance passes 80% and 78% of your home's original value.
What speeds this up, and what doesn't
Extra payments towards principal bring both dates closer. The servicer has to accept your request as soon as the loan actually reaches 80%, even if that's earlier than the original schedule.
A rise in your home's value doesn't bring the automatic 78% date forward at all, because that's always worked out on the original value. On some loans, though, it can support an earlier cancellation request if your servicer accepts a new appraisal showing you owe 80% of what the home is worth now. Lenders don't have to agree to this the way they must for the scheduled 80% and 78% dates.
Frequently Asked Questions
Do I have to ask for PMI to be removed?
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No. It has to end automatically at 78% of the original value if your payments are up to date. Asking at 80% ends it sooner, though, so it's worth making the request rather than waiting.
Does this apply to FHA loans?
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No. FHA loans have their own mortgage insurance premiums (MIP) with different rules, and on FHA loans taken out after 2013 they often last for the life of the loan unless you refinance into a conventional loan. This guide only covers conventional loans with private mortgage insurance.
What if my payments were late at some point?
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Automatic cancellation can be held back until you're up to date again. Missed or late payments in the run-up to the 78% date are the most common reason PMI carries on after it would otherwise have ended.
Can extra payments remove PMI faster?
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Yes. Any extra payment towards principal brings the 80% and 78% points closer on the calendar, because both are based on what you actually owe, not just the original schedule.
Sources
- CFPB — When can I remove private mortgage insurance (PMI) from my loan? — The Homeowners Protection Act rules on requested cancellation (80%), automatic termination (78%) and the loan-midpoint rule.