Can PMI Be Removed If Home Value Increases? LTV and Appraisal Steps

If your home has gained value since you bought it, PMI can be removed based on that higher value, but only on conventional loans and only if you meet your investor’s equity, seasoning, and payment-history rules. Fannie Mae and Freddie Mac both allow servicers to cancel private mortgage insurance using a current appraisal rather than the original purchase price, so homeowners sitting on appreciation don’t have to wait for the amortization schedule to catch up. The savings are real: PMI typically runs 0.5% to 1% of the loan amount per year, which on a $300,000 mortgage works out to roughly $125 to $250 a month.

How Much Equity You Need at the Current Value

For a single-family primary residence or second home backed by Fannie Mae or Freddie Mac, the equity threshold depends on how long you’ve owned the home:¹

Two to five years of ownership: your loan balance must be at or below 75% of the current appraised value.
More than five years of ownership: your loan balance must be at or below 80% of the current appraised value.

Note what that 75% figure means in practice. If you’ve owned fewer than five years, you need 25% equity at today’s value, not the familiar 20%. A homeowner with a $280,000 balance would need the home to appraise at roughly $373,000 under the five-year mark, versus $350,000 after it.

For multi-unit or investment properties the thresholds are tighter, running as low as 65% to 70% LTV depending on the investor and property type.¹

Payment History and Other Conditions

Hitting the equity number isn’t enough on its own. Your payment record has to be clean against this standard:

No payments 30 or more days late in the 12 months before your request.
No payments 60 or more days late in the 24 months before your request.
The mortgage must be current at the time of the request.

A single 30-day late payment within the past year is enough to disqualify you.² The windows are measured backward from your request date or the date your balance first hits the threshold, whichever is later.¹

You’ll also need to certify that your equity isn’t encumbered by subordinate liens. A home equity loan or HELOC reduces the equity your primary lender can count, and some servicers won’t process the cancellation at all until the second lien is paid off or formally subordinated.³

Renovations Can Waive the Two-Year Wait

Bought the home less than two years ago but put real money into it? Fannie Mae may waive the two-year seasoning requirement if you’ve made substantial improvements that increased the property’s value. The LTV standard in that case is 80%. Kitchen and bathroom remodels and adding square footage qualify. Routine maintenance and repairs do not.¹ Document the improvements, and understand the appraisal still has to support the higher value.

Estimate Your LTV Before Paying for an Appraisal

You pay for the appraisal whether or not it comes in high enough, so a rough calculation first is worth the ten minutes. Pull your current principal balance from your most recent mortgage statement. Estimate your home’s value from recent comparable sales nearby; online valuation tools work as a starting point but can be off by 5% to 10% or more. Divide the balance by the estimated value.

Say your balance is $240,000 and comps suggest the home is worth around $330,000. That’s roughly 0.73, or 73% LTV, which clears the 75% threshold for homes owned two to five years. If those same comps pointed closer to $310,000, the ratio would be about 77%: fine past the five-year mark, short of the threshold before it.

Be conservative. The appraiser’s number may come in lower than your best guess, and the fee is nonrefundable.

How to Request Removal

Start by calling your loan servicer. Many servicers have an online portal or specific form for PMI cancellation requests, and calling first keeps you from drafting a letter that doesn’t match their internal process. Ask whether cancellation based on current value is available on your loan, what LTV they require, and how they order the property valuation.

Then submit a written request identifying you, your loan number, and the property address, and stating that you’re requesting PMI cancellation based on the current value of the property. Send it by certified mail or through the secure portal so you have proof of the date. The servicer will arrange a property valuation through an approved appraisal management company or an automated valuation tool authorized by the investor. Fannie Mae requires the valuation to include both an interior and exterior inspection.¹

You pay for the valuation. A full appraisal for a single-family home generally runs $350 to $550, depending on the market. Some servicers accept a broker price opinion, which is cheaper but less thorough. Expect to pay before the appraiser visits.

Once the appraisal is in, the servicer checks the result against the applicable LTV and your payment record. If everything clears, the servicer must notify you in writing that PMI has been canceled and no further premiums are owed, and must refund any unearned premiums within 45 days of cancellation.² Under federal law, no further PMI payments can be required more than 30 days after the later of your request date or the date you satisfy the evidence requirements.³

If the Appraisal Comes In Low

This is where most appreciation-based requests fall apart. If the appraisal doesn’t support the required LTV, you’re out the fee and the request is denied. The Homeowners Protection Act doesn’t build in a formal appeals process for a low valuation, but you have a couple of options.

Ask the servicer whether their process allows a reconsideration of value. Some appraisal management companies will review additional comparable sales the appraiser may have missed, particularly recent sales that closed after the appraiser pulled their comps. Provide specific addresses and sale prices rather than a general complaint that the number feels low. If the appraisal contains factual errors, like wrong square footage, a missed bathroom, or an unrecorded renovation, point those out in writing.

If reconsideration doesn’t change the result, waiting and trying again is usually the only path left. Market appreciation may close the gap in six months or a year, and most servicers will accept a second request. You’ll pay for a new appraisal, so make sure the math has shifted enough to justify the cost.

FHA, VA, and USDA Loans Work Differently

Everything above applies to conventional loans. Appreciation generally does not help you remove mortgage insurance on government-backed loans.

For FHA loans with case numbers assigned on or after June 3, 2013, the rules depend on your original down payment:⁴

Down payment under 10% (LTV above 90%): MIP is charged for the life of the loan and cannot be removed regardless of appreciation.
Down payment of 10% or more (LTV at or below 90%): MIP drops off after 11 years of payments.

For FHA loans originated before June 3, 2013, MIP can be removed once the balance reaches 78% of the original purchase price, but only on the original amortization schedule, not current market value.⁵ If you have a post-2013 FHA loan with less than 10% down and substantial equity, the only way to eliminate the annual MIP is to refinance into a conventional loan. Closing costs typically run 2% to 6% of the new loan amount, so run a breakeven: divide total closing costs by the monthly savings from dropping MIP. If the result is 24 months and you plan to stay five more years, the refinance pays for itself. If the breakeven is 60 months and you might move in four, it doesn’t.

VA purchase loans don’t carry monthly mortgage insurance at all. Most VA borrowers pay a one-time funding fee at closing, which can be rolled into the loan.⁶ There is nothing to remove later. USDA guaranteed loans charge an annual fee that lasts for the life of the loan, and the only way to stop paying it is to pay the loan off or refinance into a different loan type.⁷ Appreciation offers no path on either.

1
Fannie Mae. Termination of Conventional Mortgage Insurance
2
Consumer Financial Protection Bureau. Homeowners Protection Act (PMI Cancellation Act) Manual V.2
3
Office of the Law Revision Counsel. 12 USC 4902 Termination of Private Mortgage Insurance
4
Department of Housing and Urban Development. Mortgagee Letter 2013-04
5
Computershare. FHA Mortgage Insurance Premium Removal Fact Sheet
6
Veterans Affairs. Purchase Loan
7
USDA Rural Development. Guaranteed Annual Fee (GAF) User Guide