In 2025, Experian reported that average mortgage balances exceeded $1 million in 67 U.S. cities. For most borrowers, that monthly payment already feels like enough. Adding mortgage insurance on top of it makes it even harder to get ahead.
The good news is that mortgage insurance does not have to be permanent. So, the question is, how to remove mortgage insurance, and when can you start?
What Is Mortgage Insurance?
Mortgage insurance is a financial protection for the lender. When a borrower defaults, misses payments, or dies before the loan is paid off, the policy covers the lender’s losses.
You pay for it monthly as part of your mortgage payment, and some loans also require an upfront premium at closing based on your loan type and down payment amount.
Types of Mortgage Insurance
- Private mortgage insurance (PMI): Associated with conventional loans when putting less than 20% down.
- FHA mortgage insurance premium (MIP): A requirement on FHA loans, with a 1.75% upfront fee paid at closing and a monthly premium.
- USDA guarantee fees: Embedded within USDA loans as an upfront and annual fee, serving the same purpose as standard insurance.
- VA funding fee: One-time cost on VA loans that acts as standard insurance, with waivers for those who qualify.
- Mortgage title insurance: Protects the lender if a title dispute or ownership problem arises after the sale closes.
- Mortgage protection life insurance: Covers the loan amount remaining at the time of the borrower’s death, with payment going to the lender or the borrower’s heirs.
- Borrower-paid mortgage insurance (BPMI): Paid monthly through your escrow account, along with property taxes and homeowners’ insurance.
- Lender-paid mortgage insurance (LPMI): The lender pays the premiums in return for a higher interest rate.
- Split-premium PMI: You pay a portion of the cost at closing to reduce the monthly rate.
- Single-premium PMI: One-time payment in a lump sum at closing, without monthly fee; best for borrowers looking to stay in the home long term.
Read More: Mortgage Broker: Definition, Process Steps
How Much Does Mortgage Insurance Cost?
PMI comes with an actual price tag on your monthly mortgage payment. So for every $100,000 borrowed, borrowers pay about $30 to $70, according to Freddie Mac. On a $300,000 loan, that amounts to another $90 to $210 each month.
PMI and Your Loan-to-Value (LTV) Ratio
The cost of your actual PMI will depend on your credit score and loan-to-value ratio (LTV).
LTV is the amount you borrowed over your home’s value, and most lenders restrict financing to 80% of a property’s worth.
A deposit of less than 20% increases the lender’s risk. In default scenarios, the lender recovers losses by reselling the real estate property.
For any loan with an LTV greater than 80%, mortgage insurance fills this gap.
How to Remove Mortgage Insurance
The following options can help you remove mortgage insurance depending on your loan type and equity position.
Pay Your Mortgage Early
Extra principal payments shorten the time it takes to reach 20% home equity. The faster your loan balance drops, the sooner you qualify for PMI cancellation.
Request Cancellation at 80% LTV
Once your loan-to-value ratio falls below 80% of the original value, you can send a written request to your mortgage servicer to cancel PMI. Your loan will need to meet specific conditions before the request gets approved.
Wait for Automatic Removal
Steady, on-time monthly mortgage payments will eventually trigger automatic cancellation. It takes longer than the other options, but the process handles itself as long as your account stays in good standing.
Consider Refinancing
Refinancing replaces your current mortgage with a new loan, often at a lower rate. If the new loan puts your equity at 20% or more, PMI drops off. You have to account for closing costs upfront, since they can affect how much you actually save.
Get a New Appraisal
Rising property values can work in your favor. A new home appraisal may confirm enough equity to support removing PMI. If the appraised value brings your LTV to 78% or lower, you can submit a written request to your lender to have the mortgage insurance removed.
When Does Mortgage Insurance Go Away?
Once your mortgage balance drops to 78% of the original purchase price or you reach the halfway point of your loan term, PMI automatically drops off. Your lender sends a notification with the scheduled date, provided your payments stay current.
At closing, you receive a PMI disclosure notice with the exact date your coverage ends based on consistent, on-time payments. That date marks the point when you hit 22% equity in your home.
On a 30-year conventional loan, PMI must come off at the 15-year mark regardless of your equity position.
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Frequently Asked Questions
Is it good to remove mortgage insurance?
Yes. Removing mortgage insurance lowers your monthly mortgage payment, and those savings add up significantly over the life of your loan.
Can a lender refuse to remove PMI?
Yes. If your property does not appraise as expected or you do not meet the eligibility requirements, your lender can reject the request. Meeting all conditions upfront gives your request the best chance of approval.
Is it better to pay PMI or put 20% down?
Putting 20% down avoids PMI, lowers your monthly mortgage payment, and can secure a better interest rate. That said, if reaching 20% would drain your emergency fund, carrying PMI temporarily may be the more practical call.
The Bottom Line
For most homeowners, removing mortgage insurance is one of the more impactful ways to reduce monthly housing costs. With the right approach, most homeowners can eliminate this cost before their loan term ends.
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