Canceling PMI will lower your monthly mortgage payment, but only by the amount you were paying for insurance

When you cancel private mortgage insurance (PMI), your lender stops charging you that monthly premium. Your mortgage payment drops by exactly that amount. If you were paying $150 a month for PMI, your payment falls by $150. Nothing else on your loan changes — the principal, interest rate, and remaining term stay the same.

The size of the payment reduction depends entirely on what you were paying for PMI. That amount varies based on your original loan amount, down payment percentage, credit score, and the lender's pricing. Two borrowers with similar homes and mortgages can pay different PMI amounts.

The reduction is permanent as long as you stay in the loan. You will not pay PMI again unless you refinance into a new mortgage that requires it.

Key Takeaways

  • Your monthly payment drops by the exact amount of your PMI premium when the insurance is canceled.
  • PMI typically costs between 0.3% and 1.5% of your original loan amount per year, divided into monthly payments.
  • You can request cancellation once you reach 20% equity in your home, though the timing and method depend on your loan type and lender rules.
  • Some loans require automatic termination at a specific equity level, while others need you to request it in writing.
  • Refinancing into a new loan can remove PMI when ready but resets your loan term and may change your interest rate.

What your PMI payment actually covers

PMI protects the lender, not you. It covers the lender's loss if you default and the home sells for less than what you owe. The insurance company, not your lender, pays that claim. You are paying the premium for insurance that benefits someone else — which is why removing it is worth the effort.

Your PMI premium is bundled into your monthly mortgage payment. It does not appear as a separate line item on most statements, though your loan documents and annual mortgage statement will show it. The payment amount is set when you close and typically stays the same each month, though some loans adjust it annually based on your loan balance.

When PMI is canceled, that portion of your payment vanishes. The rest of your payment — principal, interest, property taxes, homeowners insurance, and HOA fees if applicable — continues unchanged.

When you can actually cancel PMI

The rules for cancellation depend on your loan type. Conventional loans (not FHA, VA, or USDA) allow cancellation once you reach 20% equity. You can request it yourself, or in some cases the lender must cancel it automatically. FHA loans have different rules: if you put down less than 10%, you pay mortgage insurance for the life of the loan. If you put down 10% or more, you can request cancellation after 11 years.

Reaching 20% equity happens through a combination of payments and home value increase. If your home has appreciated significantly, you may reach that threshold faster than your amortization schedule suggests. You can request an appraisal to prove the current value, though lenders sometimes charge for this.

Your lender's rules matter. Some lenders automatically terminate PMI when you hit the required equity level. Others require you to submit a written request. A few require both the equity threshold and a clean payment history — no late payments in the past 12 months. Check your loan documents or call your servicer to learn your specific requirements.

How much your payment will drop

The payment reduction equals your current PMI premium. To find that number, look at your most recent mortgage statement. PMI should be listed as a separate line item, or you can call your servicer and ask directly. They will tell you the exact monthly amount.

If you cannot find it on your statement, you can estimate. PMI typically costs between 0.3% and 1.5% of your original loan amount per year. On a $300,000 loan, that ranges from roughly $75 to $375 per month. Your actual amount depends on your credit score at closing, the size of your down payment, and your lender's pricing. Better credit scores and larger down payments mean lower PMI rates.

The payment reduction is permanent for that loan. If you refinance later, a new loan may or may not require PMI depending on your equity at that time and the new loan amount.

Refinancing versus waiting for cancellation

Some borrowers refinance to remove PMI instead of waiting to reach 20% equity. Refinancing into a new conventional loan with 20% equity removes PMI when ready. The tradeoff is that you restart your loan term, pay closing costs (typically 2% to 5% of the loan amount), and your interest rate may be higher or lower than your current rate.

Refinancing makes sense if your home has appreciated enough that you now have 20% equity, your credit score has improved since you closed, or interest rates have dropped significantly. It does not make sense if you are close to reaching 20% equity naturally, because the closing costs will outweigh the PMI savings.

Do the math: if you will reach 20% equity in 18 months and your PMI is $150 a month, you will pay $2,700 more in PMI. If refinancing costs $6,000, you lose money. If you will reach it in four years, refinancing may be worth it.

What does not change when PMI is canceled

Your interest rate stays the same. Your loan term does not shorten. Your principal balance does not drop. The only change is the removal of the PMI premium from your monthly payment.

Your total interest paid over the life of the loan does decrease slightly, because you are paying interest on a slightly lower balance each month (the PMI amount is no longer part of what you owe). But this is a small effect. The main benefit is the when ready monthly payment reduction.

Property taxes, homeowners insurance, and HOA fees do not change. If your lender collects these in an escrow account as part of your mortgage payment, those amounts continue as before.

Steps to request PMI cancellation

First, confirm you meet your lender's requirements. Call your servicer or log into your online account and ask: What equity percentage do I need to request cancellation? Do you require a clean payment history? Do I need an appraisal?

If you need an appraisal, order one through an independent appraiser or ask your lender for a list of approved appraisers. The appraisal typically costs $400 to $600. Your lender will not accept an appraisal you ordered yourself unless it meets their standards, so confirm the process first.

Once you meet the requirements, submit a written request to your servicer. Include your loan number, current address, and a statement that you are requesting PMI cancellation based on reaching the required equity threshold. Some lenders have a form for this; ask. Keep a copy of your request and any response.

Your servicer will review the request and either approve it or ask for additional documentation. Approval typically takes two to four weeks. Once approved, PMI is removed from your next payment or the payment after that, depending on the servicer's processing schedule.

Frequently Asked Questions

If I pay extra toward principal, will I reach 20% equity faster?

Yes. Extra principal payments reduce your loan balance, which increases your equity percentage. If you are close to 20% equity, paying extra can get you there months or years sooner. However, the math depends on your home value staying stable or rising. If your home value drops, your equity percentage drops even if you pay extra.

Can my lender refuse to cancel PMI even if I have 20% equity?

No. Federal law requires lenders to cancel PMI on conventional loans once you reach 20% equity, though the exact rules vary by loan type and age. If your lender refuses after you meet the requirements, contact the Consumer Financial Protection Bureau or your state's banking regulator.

What happens to PMI if I sell my home?

PMI ends when you sell, because the loan is paid off. You do not get a refund of PMI you already paid. If you sell before reaching 20% equity, you will have paid PMI for the entire time you owned the home.

Does paying off my mortgage early remove PMI?

Yes. When you pay off the loan in full, PMI ends when ready because the lender no longer needs protection. However, you will not get a refund of PMI premiums already paid.

Can I remove PMI from an FHA loan?

It depends on your down payment. If you put down 10% or more, you can request cancellation after 11 years of payments. If you put down less than 10%, you pay mortgage insurance for the life of the loan. Refinancing into a conventional loan is the only way to remove it early.