Millions of American homeowners are quietly handing their mortgage servicer an extra $100 to $300 every month, and many of them don't have to.
It's called private mortgage insurance, or PMI, and it's usually required when you put down less than 20 percent on a home.
Once you've built enough equity, you can ask to have it removed — and in some cases, your lender has to drop it automatically.
The problem is that most people never make the call, so the payments just keep coming.
Here's how the rules actually work, and what you can do about it. **When you can request removal** For conventional loans, the federal Homeowners Protection Act gives you the right to ask your servicer to cancel PMI once your loan balance drops to 80 percent of the home's original value.
That's based on the original purchase price or appraised value at closing, not today's market.
You generally need a good payment history, no other liens on the home, and you may have to confirm in writing that you still live there.
Your servicer can also require an appraisal, and some lenders charge a few hundred dollars for that — so run the math before you file the request. **When it falls off on its own** If you never ask, the law still steps in.
Once your balance reaches 78 percent of the original value, your servicer must automatically terminate PMI, provided you're current on payments.
That happens based on your normal amortization schedule, so it can take years longer than the 80 percent request date.
There's also a hard final termination date: PMI must end when you hit the midpoint of your loan's amortization period.
On a 30-year loan, that's around year 15, no matter what. **Why the gap matters** Say you bought a $400,000 home with 10 percent down.
Waiting for automatic termination instead of requesting removal at 80 percent could stretch that payment out an extra year or two — real money that could go toward your emergency fund or a credit card balance.
First, extra principal payments shrink your balance faster and pull both thresholds closer.
Second, if your home has appreciated a lot, a new appraisal might show you've already crossed 80 percent of current value — though not every lender accepts market appreciation for conventional loans, so ask first. **Watch out for FHA loans** If you have an FHA mortgage, the rules are different and stingier.
Loans with less than 10 percent down typically carry mortgage insurance for the life of the loan unless you refinance into a conventional loan.
Loans with 10 percent or more down can eventually drop the annual premium after 11 years.
That's why some FHA borrowers refinance once they have enough equity.
It can eliminate the insurance, but closing costs and a new rate mean the math doesn't work for everyone. **Your move this week** Find your latest mortgage statement and look for a line item for PMI, MIP, or mortgage insurance.
Then call your servicer and ask two questions: what's my current loan-to-value ratio, and what's the exact process to remove PMI?
Rules vary by lender and loan type, and servicers don't always volunteer the details.
Final Thoughts
A 15-minute phone call could be worth a few thousand dollars over the next couple of years — and that's a better return than most savings accounts are paying right now.