Option 1: ask your servicer to cancel
Federal law gives most conventional borrowers the right to request PMI cancellation once the loan balance reaches 80% of the home's original value. Original value usually means the purchase price or the appraisal at closing, whichever was lower. You can get there on schedule or sooner by paying extra principal.
Servicers typically ask for a written request, a good payment history and proof that the home hasn't lost value. You keep your loan and your rate.
Automatic cancellation
If you never ask, PMI generally ends on its own when your balance is scheduled to reach 78% of the original value, as long as you are current on payments. It also ends by the midpoint of your loan term in most cases.
Canceling based on today's value
Some servicers will cancel PMI based on your home's current value, not the original value. They usually require a new appraisal that you pay for, plus a minimum time since closing, often at least two years. The rules come from your loan's investor, so ask your servicer for theirs.
Option 2: refinance without PMI
A refinance replaces your loan with a new one based on today's value. If your home has gained value, or you have paid the balance down, you may have 20% equity or more. With 20% equity, you can refinance to a conventional loan without PMI. If today's rates are also lower than yours, a refinance can drop PMI and lower your rate at once.
This is also the usual path off FHA mortgage insurance, which often can't be canceled the way PMI can.
Compare the two paths
- Cancel: you keep your current rate and term, and the cost is often just an appraisal
- Refinance: you get a new rate and term, and the loan is based on today's value
- Cancel fits best when your rate is already low
- Refinance fits best when today's rates are lower or you have FHA mortgage insurance
An example
Hypothetical example. APR may differ; example only. Rates change daily. Say you pay $160 a month in PMI and your rate is already below today's rates. Canceling removes the $160 and keeps your low rate, so it usually wins. If today's rates are lower than yours, a refinance could remove the $160 and lower your principal and interest too.
CapCenter refinances come with ZERO Closing Costs (restrictions apply), so a refinance has fewer costs to weigh against the savings.
