Mortgage servicers collected billions in private mortgage insurance last year, and a surprising share of it came from borrowers who had already earned the right to stop paying.
Private mortgage insurance, or PMI, typically runs 0.3% to 1.5% of your original loan amount annually.
On a $350,000 mortgage, that's roughly $1,000 to $5,000 a year, tucked invisibly into your monthly payment.
Unlike homeowners insurance, PMI protects the lender, not you.
You get nothing back if you never default.
The removal rules depend on which type of loan you carry.
For conventional loans backed by Fannie Mae and Freddie Mac, the Homeowners Protection Act sets two automatic off-ramps.
PMI must terminate automatically once your loan balance reaches 78% of the home's original value, provided you're current on payments.
You can also request cancellation earlier, at 80%, but that request is on you.
That 80% request is where money quietly leaks away.
Servicers aren't required to remind you at that threshold, so borrowers who bought in 2021 and watched their equity balloon may still be paying PMI today without realizing it.
If you put down less than 10%, your mortgage insurance premium generally lasts the entire life of the loan.
The only exit is refinancing into a conventional loan, which makes sense only when rates and equity line up.
A refinance that cuts PMI but raises your rate can cost more than it saves.
Appraisal-based removal is the other path, and it's become more attractive as home values climbed in many markets.
If you believe your home has appreciated enough to push your loan-to-value ratio under 80%, you can usually pay $400 to $800 for an appraisal and ask your servicer to drop PMI.
The math works when the appraisal comes in high enough to clear the threshold.
What tripped up borrowers recently: some servicers now accept a Broker Price Opinion or automated valuation instead of a full appraisal, which cuts the cost to around $100 to $200.
Policies vary by lender, and so do the forms, timelines, and whether you need to be current on payments.
Pull your latest mortgage statement and find the PMI line.
Check your original loan documents for your amortization schedule and the date you hit 80%.
If you're close, call your servicer and ask exactly what they require, in writing.
Then run the break-even math on an appraisal: divide the appraisal cost by your monthly PMI to see how many months it takes to pay off.
Some servicers apply their own valuation rules that differ from your county's tax assessment.
A hot local market doesn't guarantee your servicer will agree your home is worth more.
If you're denied, you can typically request reconsideration with your own appraisal.
One more thing worth checking: if you've paid PMI past the 78% automatic termination point and stayed current, you may have grounds to request a refund of premiums paid after that date.
Not every servicer volunteers this, and the window for claims varies.
The bottom line: PMI removal isn't automatic at 80%, and servicers have little incentive to speed it along.
Set a calendar reminder for the month you expect to cross the threshold, request cancellation in writing, and keep copies of everything.
Final Thoughts
A few hours of paperwork can be worth thousands of dollars a year, which is a better return than most savings accounts will pay you.