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PMI Removal Appraisal

Private mortgage insurance typically costs hundreds of dollars a year and protects your lender, not you. If your home has gained value or you have paid the balance down, an appraisal is often the key that unlocks cancellation years early. Here is how the rules actually work.

The three ways PMI ends on its own

Under the federal Homeowners Protection Act (conventional loans on your principal residence; FHA and VA loans have different rules):

• You can request cancellation at 80%. When your balance first reaches 80% of the home's original value (the purchase price or original appraisal), you can ask your servicer in writing to cancel PMI. You need a good payment history and a current loan, you may need to certify there are no junior liens on the home, and the servicer may ask for evidence the value has not declined.
• Automatic termination at 78%. The servicer must cancel PMI when the balance is scheduled to hit 78% of original value, if the loan is current.
• Final termination at the loan's midpoint. If PMI somehow survives both of the above, it must end the month after you reach the midpoint of the loan's amortization schedule (15 years into a 30-year loan), if the loan is current.

All three run off original value and your amortization schedule. If your market has appreciated, waiting for them can mean years of unnecessary premiums.

The current-value route: where the appraisal comes in

Servicers following Fannie Mae's servicing guide can cancel PMI based on the home's current value:

• Loan seasoned 2 to 5 years: current LTV must be 75% or lower.
• Loan seasoned more than 5 years: current LTV must be 80% or lower.
• Substantial improvements you made can qualify earlier at the 80% threshold.

The catch: eligibility must be evidenced by a valuation based on an interior and exterior inspection, ordered through your servicer. In practice this is often a broker price opinion rather than a full appraisal for single-unit homes, depending on the servicer and state law. You cannot simply mail in a number from a website, and as of this writing the guide does not accept automated estimates for this route. Call your servicer first: ask for their PMI cancellation process, what valuation they order, and what it costs you. An appraisal you commission independently is still useful as a pre-check, so you do not pay a servicer-ordered valuation fee only to miss the threshold.

The math

Say PMI costs $1,400/year and a pre-check appraisal costs about $400. If the appraisal shows you clear the LTV threshold now instead of three years from now, that is roughly $4,200 of premiums saved for a few hundred dollars of certainty. If the numbers are marginal, ask the appraiser for a consult before ordering a full report.