If you bought a home in the last few years with less than 20 percent down, you are probably paying private mortgage insurance every month.
That PMI line item typically runs $100 to $250 on a median-priced home, and it does nothing for you.
The good news is that PMI is not permanent.
The bad news is that the rules for getting rid of it have gotten murkier, and a lot of homeowners are leaving money on the table because nobody explained the fine print.
Here is how PMI removal actually works, and where people get tripped up.
There are two very different paths, and confusing them is the most common mistake.
Under federal law, your servicer must cancel PMI automatically once you reach 22 percent equity based on the original home value and your original amortization schedule.
That means you get there by paying down the loan, not because your house went up in value.
The second path is borrower-requested cancellation, and you can ask at 20 percent equity.
This is where the real money sits right now, because millions of homeowners have crossed that threshold thanks to rising prices.
But most servicers only cancel based on the original value unless you specifically request an appraisal-based review.
That distinction matters enormously in a market like this one.
If you put 10 percent down on a $350,000 house three years ago, you may now have 30 percent equity on paper.
Your servicer does not care until you make them look.
Each lender sets its own requirements, but the pattern is consistent.
You generally need a good payment history, often no 30-day late payments in the last 12 to 24 months.
Investment properties and second homes usually face stricter standards than primary residences.
Many servicers require a broker's price opinion or a full appraisal to confirm current value, and you pay for it out of pocket.
That can run $150 to $600 depending on the product and the market.
It is refundable only in the sense that if the numbers work, you start saving immediately.
If PMI is $180 a month and the appraisal costs $500, you break even in under three months.
If your equity is borderline, though, you can spend the fee and get a "no." Two more traps worth knowing.
First, some loans carry lender-paid mortgage insurance, which is baked into a higher interest rate and cannot be removed.
Check your closing documents before you assume you have a removable policy.
Second, FHA loans have their own rules, and if you put down less than 10 percent, that insurance generally lasts the life of the loan unless you refinance.
Servicers are not required to advertise any of this.
They are required to give you an annual disclosure, which most people toss without reading.
My take: this is one of the few genuinely winnable fights in consumer finance right now, and it is sitting unclaimed in millions of loan files.
Final Thoughts
The system is designed so that inertia works in the lender's favor, which means the burden falls on you to make a phone call and read your own paperwork.