PMI Is Not Forever: The 80%, 78% and Midpoint Rules

Somewhere in your closing package is a one-page private mortgage insurance disclosure with two dates printed on it. Most buyers sign it, file it, and never look at it again. Those two dates are the only part of your PMI arrangement that is guaranteed by federal law, and pulling that page out of the drawer is the first step in getting the premium off your payment.

PMI on a conventional loan ends. The Homeowners Protection Act sets out exactly how, and the Consumer Financial Protection Bureau summarizes the same rules in plain language. There are three separate exits, and they do not work the same way.

Exit One: You Request Cancellation at 80% LTV

You may request that your servicer cancel PMI once the loan balance reaches 80% of the original value of the property. The request is not automatic and it is not verbal. To be entitled to it:

• The request must be in writing.

• You must have a good payment history and be current on the loan.

• There can be no junior liens on the property — a HELOC you opened two years ago will block this.

• The property value must not have declined below its original value.

"Original value" is the phrase people get wrong, and it is the single most expensive misunderstanding in this whole area. Original value means the lesser of the sale price and the appraised value at the time the loan closed. It does not mean what the house is worth today. Your neighbor's sale at a higher price does not move this number. Nothing moves this number.

So the 80% trigger is arithmetic on your amortization schedule, not a market question.

Exit Two: Automatic Termination at 78%

Your servicer must automatically terminate PMI when the balance reaches 78% of the original value on the scheduled amortization schedule, provided you are current on payments at that date. You do not request it. You do not document anything. It happens.

The word "scheduled" carries real weight. Automatic termination runs off the original payment schedule the loan was written on. If you have been sending an extra $500 a month at principal, your actual balance hits 78% earlier than the schedule says — but the automatic termination date does not move. Extra principal accelerates your eligibility for the request path at 80%. It does not accelerate the automatic one.

That is a good reason to make the written request rather than waiting.

Exit Three: The Amortization Midpoint Backstop

If neither of the above has happened, PMI must end the month after the midpoint of the amortization period — year 15 of a 30-year loan — regardless of the loan balance, as long as you are current.

On a normally amortizing fixed-rate loan this rule almost never fires, because 78% arrives long before the midpoint. It exists for loans that pay down slowly: interest-only periods, modified loans, longer terms, and balances that grew before they shrank. If your loan has any of those features, this is your floor.

Exit	Trigger	Who acts	Based on	Conditions
Borrower request	80% LTV of original value	You, in writing	Actual balance	Current, good payment history, no junior liens, value not declined
Automatic termination	78% LTV of original value	Servicer	Scheduled balance	Current on the payment date
Midpoint	Halfway through the amortization term	Servicer	Time, not balance	Current
Appreciation-based removal	Investor's LTV threshold	You, with a new appraisal	Current appraised value	Servicer and investor discretion — not a legal right

These rules apply to single-family principal residences with loans closed on or after July 29, 1999. FHA and VA loans work differently, and the difference is large enough to change which loan you should have taken.

The Worked Example: $500,000, 5% Down

Purchase price $500,000, 5% down, loan amount $475,000, 30-year fixed. For the arithmetic we will use 6.95%, the Freddie Mac Primary Mortgage Market Survey 30-year average for the week of September 17, 2026. That is a survey number used to make the math concrete, not a rate offered to you.

Principal and interest: $3,144.25 per month.

Original value is $500,000, so the thresholds are fixed on day one:

• 80% of original value = $400,000

• 78% of original value = $390,000

Running the amortization on scheduled payments only:

• The balance falls below $400,000 during month 129 — ten years and nine months in. That is the earliest you can send the written cancellation request.

• The balance falls below $390,000 during month 141 — eleven years and nine months in. That is the automatic termination date.

• At the midpoint, month 180, the balance is about $350,907, or 70.2% of original value. The midpoint rule never gets a chance to do anything here, which is exactly what you would expect on a clean 30-year fixed.

Twelve months of PMI is the gap between doing nothing and writing one letter. Price out what your specific PMI premium is per month and multiply by twelve. That number is usually large enough to put a calendar reminder at month 125.

The Appreciation Path Is Real, But It Is Not a Right

The three rules above are statutory. There is a fourth route that is not.

Many servicers will remove PMI based on a new appraisal showing the loan has fallen below their LTV threshold because the property appreciated, not because you paid it down. In a market like Frisco or Fremont after a strong few years, that can arrive years before month 129.

Be precise about what this is: it is investor and servicer policy, not a federal entitlement. The threshold may be 80% or it may be 75%. There is usually a seasoning requirement — a minimum number of months since closing, often longer if the appreciation is the basis. The servicer typically orders the appraisal or broker price opinion and you pay for it. And they can decline.

Do not order an appraisal on your own initiative and then present it to your servicer. Call the servicer first, ask for their PMI removal requirements in writing, and find out who is allowed to order the valuation. An appraisal you commissioned yourself will usually be rejected, and you will have spent several hundred dollars to learn that.

Why FHA Is a Different Conversation Entirely

None of this applies to FHA mortgage insurance. On an FHA loan originated after June 3, 2013, the annual MIP runs for the life of the loan if you put less than 10% down, and for 11 years if you put 10% or more down. There is no 78% automatic termination. There is no written request at 80%. Appreciation does nothing.

The only exit from life-of-loan FHA MIP is refinancing into a conventional loan, and whether that math works depends on the rate you can get versus the rate you have. We run that comparison in the FHA MIP refinance math, and compare the two programs head to head at a strong credit score in FHA vs conventional at 740.

For non-permanent residents the question is now academic. Mortgagee Letter 2025-09 removed FHA eligibility for non-permanent resident borrowers for case numbers assigned on or after May 25, 2025. If you are on an H-1B, L-1, O-1, TN or an EAD, conventional is your path, and conventional PMI is the insurance you will be dealing with.

If you are still choosing a down payment, the PMI timeline should be an input. Our post on HomeReady and the 3% down programs lays out the 5% versus 20% trade with the same arithmetic. And if you are moving between markets, Bay Area to Texas shows how the insurance line interacts with a very different tax line.

Frequently Asked Questions

Q: When can I ask my lender to remove PMI?
A: Once your loan balance reaches 80% of the original value — the lesser of the purchase price or the appraised value at closing. The request must be in writing, you must be current with a good payment history, there can be no junior liens, and the property value must not have declined.

Q: Does paying extra principal remove PMI faster?
A: It moves up the date you become eligible to request cancellation at 80%, because that test uses your actual balance. It does not move up the automatic termination at 78%, which is based on the original scheduled amortization. If you are paying extra, send the written request rather than waiting.

Q: Can I remove PMI because my house went up in value?
A: Sometimes. That path relies on a new appraisal and is governed by servicer and investor policy, not by the Homeowners Protection Act. Thresholds and seasoning requirements vary. Call your servicer for their requirements in writing before paying for any valuation.

Q: Does PMI ever fall off automatically?
A: Yes. Your servicer must terminate PMI when the scheduled balance reaches 78% of original value and you are current, and no later than the month after the amortization midpoint — year 15 of a 30-year loan — regardless of balance.

Q: Do these PMI rules apply to FHA loans?
A: No. FHA mortgage insurance follows its own rules: annual MIP for the life of the loan at less than 10% down, or 11 years at 10% or more, on loans originated after June 3, 2013. The only way out of life-of-loan FHA MIP is a refinance.

Ready to get started? Masala Loans by Matador Lending specializes in exactly this. Call 713-366-4668 or get your no-haggle rate at masalaloans.com.

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