Millions of American homeowners are still writing a check every month for private mortgage insurance they may no longer legally need.
Private mortgage insurance, or PMI, typically costs 0.5% to 1.5% of your loan amount per year.
On a $350,000 mortgage, that runs roughly $150 to $400 a month, money that protects the lender, not you.
The rules for getting rid of it depend on which type of loan you have, and that distinction trips up a lot of people.
If you have a conventional loan backed by Fannie Mae or Freddie Mac, federal law gives you two paths out.
The first is automatic termination: once you pay the balance down to 78% of the home's original value, your servicer must cancel PMI.
The second is a borrower request, which you can make once you hit 80% based on the original value and your payment history is current.
FHA loans work differently and often require refinancing to drop the insurance, especially if you put less than 10% down.
Meeting the 80% threshold does not automatically end the charge.
You generally have to ask, in writing, and servicers have every incentive to let inertia do the work.
Consumer advocates have argued for years that many borrowers never get the letter they deserve.
The math on home values is the real story right now.
Rising prices since 2020 pushed a lot of buyers past 20% equity fast, but the 80% test for a borrower-requested cancellation is usually based on the original purchase price or the original appraised value, not today's market.
Homeowners who assume their Zillow estimate is enough are often wrong.
If you want to request removal, expect homework.
Lenders commonly want a written request, proof you're current on payments, and sometimes a new appraisal you pay for out of pocket, often $400 to $700.
Some servicers accept a broker price opinion instead, which is cheaper.
A few will consider recent home improvements, but only with documentation.
Under the Homeowners Protection Act, servicers must provide an annual notice telling you whether you can request cancellation.
If you have not seen that notice in years, that is worth a phone call.
The Consumer Financial Protection Bureau takes complaints on this, and lenders tend to move faster when a regulator is cc'd.
Two groups benefit from the status quo: mortgage servicers collecting the premium and the insurers themselves.
Neither has a strong reason to remind you the clock ran out.
That asymmetry is the whole game. **The bottom line:** if you put less than 20% down and have been paying for years, dig out your closing paperwork and check your amortization schedule.
Final Thoughts
A 15-minute call could be worth several thousand dollars over the life of the loan.