To calculate PMI removal, divide your current loan balance by the home’s original value and multiply by 100. That gives you your loan-to-value ratio (LTV). At 80 percent, you can submit a written request to cancel private mortgage insurance. At 78 percent, your servicer must terminate it automatically. Those two percentage points are set by the federal Homeowners Protection Act, and the gap between them is where most borrowers leave money on the table.
Running the LTV Calculation
The formula is one line:
LTV = (Current Principal Balance ÷ Original Value of the Home) × 100
Your current principal balance is what you still owe on the loan, not counting interest or escrow. Pull it from your monthly statement or your servicer’s online portal. If you owe $320,000 on a home with an original value of $400,000, the math gives you 0.80, or 80 percent. You have 20 percent equity, and you’ve reached the threshold to request cancellation.
It’s worth rerunning the number every few months. Early in a mortgage, most of each payment goes to interest and your balance barely moves. Later on, principal paydown accelerates, and your LTV can drop faster than the amortization schedule suggests, especially if you’ve made any extra payments.
What “Original Value” Actually Means
Federal law defines original value as the lower of two figures: the sale price in your purchase contract or the appraised value at closing. If you paid $410,000 but the appraisal came in at $400,000, your original value is $400,000. Lenders use the more conservative number because it reflects the property’s verified worth at the time the loan was made.
For a refinanced mortgage, there’s no sale price involved, so original value simply means the appraised value the lender relied on when approving the refinance.
This matters because a lower original value makes your LTV higher, which means reaching 80 percent takes longer. If the appraisal at closing came in below your purchase price, you started at a disadvantage.
The 80 Percent Threshold: When You Can Request Cancellation
Once your LTV hits 80 percent of original value, the Homeowners Protection Act gives you the right to ask for PMI to come off. Four conditions apply:
- You submit the request in writing to your servicer.
- You have a good payment history. No payment can have been 60 or more days late during the 12 months ending 24 months before your cancellation date, and no payment can have been 30 or more days late during the 12 months immediately before it.
- You’re current on your mortgage at the time of the request.
- You provide evidence the home hasn’t lost value since closing and certify that no subordinate liens (like a home equity line of credit or second mortgage) encumber your equity.
You can reach 80 percent two ways: through the loan’s original amortization schedule, or ahead of schedule through extra principal payments. Either counts. The payment-history rules are strict on the recent end, so a single 30-day late payment in the year before you request cancellation can disqualify you even if the rest of your record is clean.
The 78 Percent Threshold: Automatic Termination
If you never submit a request, your servicer must still drop PMI when your LTV reaches 78 percent. That sounds like a safety net, but it comes with a catch that costs many borrowers money.
Automatic termination runs off the original amortization schedule, not your actual balance. The date was fixed at closing based on the assumption that you’d pay exactly the minimum every month. If you’ve been making extra payments and your real balance is already below 78 percent of original value, the automatic trigger won’t fire until the scheduled date arrives anyway.
That gap is precisely why the borrower-requested cancellation at 80 percent exists. If you’re ahead of schedule, requesting cancellation can end PMI years earlier than passively waiting. Automatic termination also requires that you be current on payments when the scheduled date hits; if you’re behind, PMI drops off on the first day of the month after you become current.
The Midpoint Backstop
There’s one more safety valve. PMI can never be required past the midpoint of your loan’s amortization period, no matter your LTV. On a 30-year mortgage, that’s 15 years in. On a 15-year mortgage, 7.5 years. If neither a borrower request nor automatic termination has already ended PMI by then, it comes off on the first day of the month after the midpoint date, provided you’re current.
This provision protects borrowers whose home values dropped, or who fell behind and missed earlier termination dates. Nobody pays PMI forever on a conventional loan.
Using Current Value Instead of Original Value
Everything above uses the home’s original value. But if your home has appreciated, Fannie Mae and Freddie Mac allow servicers to use the current appraised value to evaluate PMI cancellation. The trade-off is stricter LTV thresholds and minimum waiting periods.
For a single-unit primary residence or second home under Fannie Mae’s rules, the loan must be at least two years old. Between two and five years after closing, your LTV based on current appraised value has to be 75 percent or less. After five years, the threshold loosens to 80 percent or less. Fannie Mae will waive the two-year wait if the increased value comes from improvements you made to the property, like a renovation or added square footage; routine maintenance doesn’t count. When the waiver applies, the LTV threshold is 80 percent or less.
Freddie Mac’s rules follow the same pattern: 75 percent or less between two and five years, 80 percent or less after five years, with case-by-case waivers for substantial improvements. Investment properties and multi-unit residences face tighter numbers under both.
Both require a professional appraisal to establish current value. Expect to pay for it yourself, typically $300 to $800 depending on your market and property type.
How to Submit the Request
Once your numbers work, the process starts with a written request to your servicer. A phone call won’t do. Your letter should identify the loan, state your current balance and the original value, and explicitly request cancellation of PMI. Some servicers use their own form, so check first.
The servicer will usually order an appraisal to confirm the home hasn’t lost value since closing, or to establish current value if you’re using the appreciation route. You’ll pay for it. The servicer will also check for subordinate liens. A HELOC with a zero balance can still block cancellation because it represents a potential claim on your equity; if you have one open and unused, consider closing it before you file.
Federal law gives the servicer 30 days to respond after receiving your request and any required documentation. If you qualify, you’ll get written confirmation and PMI comes off your next billing cycle. If you’re denied, the servicer must give written reasons in that same 30-day window. Common denials involve a low appraisal, a subordinate lien, or a late payment inside the lookback period.
Loans These Rules Don’t Cover
The Homeowners Protection Act applies to conventional mortgages with borrower-paid PMI. Several common loan types sit outside it entirely, and the calculation above won’t get you anywhere on them.
FHA loans carry a mortgage insurance premium (MIP), not PMI. For loans originated after June 2013 with more than 10 percent down, MIP drops off after 11 years. With 10 percent or less down, MIP stays for the life of the loan, and the only escape is refinancing into a conventional loan.
VA loans require no monthly mortgage insurance at all. Borrowers pay a one-time funding fee at closing instead, so there’s nothing to cancel.
USDA-guaranteed loans charge an annual fee that functions like monthly mortgage insurance. It stays for the life of the loan and can’t be canceled based on equity.
Lender-paid mortgage insurance (LPMI) is a conventional product where the lender buys the coverage and passes the cost through a higher interest rate. The HPA explicitly excludes LPMI from its cancellation and termination provisions. The only way to shed it is to refinance or pay off the loan.
Certain “high-risk” loans have their own thresholds. For nonconforming loans a lender classifies as high risk, PMI must terminate when the scheduled balance reaches 77 percent of original value. For conforming high-risk loans held by Fannie Mae or Freddie Mac, the midpoint backstop still applies.