To get rid of Private Mortgage Insurance (PMI) without a 20% down payment, you can use a piggyback loan (80-10-10), choose lender-paid PMI (higher rate, no monthly fee), request cancellation at 80% Loan-to-Value (LTV) via home appreciation/payments, or use VA/USDA loans. PMI automatically drops at 78% LTV.
Get an 80-10-10 Loan
If you have enough money saved for a 10% down payment, using an 80-10-10 loan—also called a piggyback loan—can help you avoid PMI. With these loans, you use two mortgages to buy your house: One covers 80% of the home's price and a second one covers an additional 10%.
If you've made home improvements, you can request PMI removal as long as you have 20% equity. If you're basing your request on an increase in market value without making any improvements, you need to have 25% equity. After 5 years, 20% equity suffices.
20% down will eliminate the PMI requirement and give you a smaller mortgage payment. Those are considerable savings, even if you don't stay in the home for life.
The 3-7-3 Rule in mortgages isn't a loan type but a federal timeline from the TILA-RESPA Integrated Disclosure (TRID) rule, ensuring borrower protection by mandating disclosures within 3 business days of application, a 7-business-day wait between the initial Loan Estimate and closing, and another 3-day wait if significant changes (like APR) occur, giving borrowers time to review costs before committing to a loan.
For a $300,000 house, Private Mortgage Insurance (PMI) typically adds about $115 to $375 per month, depending on your loan amount, credit score, and down payment, with rates generally ranging from 0.46% to 1.5% of the loan annually. A good estimate for a $300k mortgage is around $150-$225 monthly, based on common rates like 0.5% to 0.75%, but could be higher if you have poor credit or a very small down payment.
Instead, you can request that the lender cancel PMI sooner, when your mortgage balance hits 80 percent of the home's purchase price. Here's how: Make the PMI cancellation request to your lender or servicer in writing. Be current on your mortgage payments, with a good payment history.
Combined with paying down your loan, you could potentially have the 20% equity you need to refinance your loan without the need for PMI. This could save you hundreds of dollars a month that could be used to pay down more of your home loan principle each month or used for other things.
HPA allows homeowners to initiate PMI removal once the principal balance of their mortgage drops to 80% of the original value of their loan. In our $300,000 home example, you would have the ability to request PMI removal once the amount owed on your loan hits $240,000 (or 80% of $300,000).
Here are four ways homeowners can remove PMI before it's automatically canceled:
Yes, a lender can refuse to remove PMI. For instance, if your property does not appraise as expected or you do not satisfy a requirement, a lender can reject your request. However, if you meet the requirements, you can request the removal of PMI.
Yes, if the value of your home has increased enough to reduce your loan-to-value ratio (LTV) to 80% or less, refinancing can remove your PMI.
Yes, Private Mortgage Insurance (PMI) can go away once you reach 20% equity, but federal law mandates automatic cancellation when your loan balance drops to 78% of the original home value (22% equity), and you can request it at 80% equity (20% down) if you're current on payments. You can reach this 20% equity through regular payments, home appreciation (via appraisal), or even refinancing, but you must contact your lender to initiate cancellation at the 80% mark, as lenders need proof of value and good payment history.
One path to removing PMI from your mortgage without refinancing is to build up the equity in your home. In this case, your PMI can be automatically removed when you reach a certain amount of equity. Equity is calculated by subtracting the amount you owe on your mortgage from the appraised value of your home.
The most important thing to know about PMI is that it's not forever. Generally, PMI can be removed from your monthly payments in two ways: when you pay your loan balance down below 80% of the purchase price of your home, or once you have achieved 20% equity in your home.
If the mortgage insurance was financed at the time of origination and is canceled prior to its maturity you may be entitled to a refund if the refundable option was chosen at the time of origination. However, if there was no refund/limited option, this would negate any option for a refund.
The 80% rule in home insurance means you must insure your home for at least 80% of its total replacement cost to receive full coverage for partial losses; if you insure for less, the insurer applies a penalty, reducing your payout proportionally, to prevent underinsurance and ensure you can actually rebuild. It's a guideline to cover the cost to rebuild from scratch (materials, labor, etc.), not market value, requiring homeowners to update coverage for renovations or rising costs to avoid significant out-of-pocket expenses.
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Making an extra mortgage payment each year could reduce the term of your loan significantly. The most budget-friendly way to do this is to pay 1/12 extra each month. For example, by paying $975 each month on a $900 mortgage payment, you'll have paid the equivalent of an extra payment by the end of the year.