A comprehensive guide to pmi removal guide from NMHL mortgage experts.
NMHL Editorial Team2026-02-188 min read
<p>The Homeowners Protection Act of 1998 (HPA) is the federal law that governs when lenders must automatically terminate PMI and when borrowers can request early cancellation. The key provisions are:</p>
<ul>
<li><strong>Automatic termination:</strong> Lenders must cancel PMI when the loan reaches 78 % of the original principal balance (i.e., 22 % equity) provided the borrower is current on payments.</li>
<li><strong>Borrower‑initiated cancellation:</strong> Borrowers may request removal once they have 20 % equity based on the original purchase price, provided they have a good payment history (no late payments in the last 12 months) and the loan is at least two years old.</li>
<li><strong>Appraisal requirement:</strong> For borrower‑initiated requests, the lender can require a new appraisal to verify the current value. The cost of the appraisal is typically the borrower’s responsibility.</li>
</ul>
<p>NMHL adheres strictly to HPA guidelines and offers a streamlined “PMI Cancellation Request” portal that pre‑populates the required forms, reducing paperwork and speeding up the process.</p>
<p>Most homeowners eliminate PMI by simply paying down the principal and/or benefiting from home‑value appreciation. Here’s how to calculate when you’ll hit the 20 % equity mark:</p>
<ol>
<li>Determine your original loan amount (e.g., $240,000).</li>
<li>Calculate 80 % of that amount: $240,000 × 0.80 = $192,000.</li>
<li>Subtract the current principal balance from the original amount. If your balance is $195,000, you still need to pay down $3,000.</li>
<li>Consider appreciation: If a recent appraisal shows the home is now worth $280,000, 20 % equity is $56,000. Subtract the current balance ($195,000) to see you already have $85,000 equity—PMI can be cancelled immediately.</li>
</ol>
<p>Real‑world example: Jane bought a $300,000 home with a 5 % down payment ($15,000) and a $285,000 loan. After three years of regular payments, her balance fell to $260,000. A 2024 appraisal valued the home at $340,000, giving her an LTV of 76 % (24 % equity). She called NMHL, submitted the appraisal, and had PMI removed after just 36 months—saving $1,800 per year.</p>
<p>Refinancing can be a powerful tool, especially when interest rates drop or when you have built enough equity to qualify for a conventional loan without PMI. The steps are:</p>
<ul>
<li><strong>Check current rates:</strong> As of February 2026, the average 30‑year fixed rate for borrowers with a credit score of 720+ is 5.75 %—down from 6.5 % a year earlier.</li>
<li><strong>Calculate break‑even:</strong> If refinancing costs $3,500 in closing fees and reduces your monthly payment by $150 (including PMI removal), you’ll break even in about 23 months.</li>
<li><strong>Gather documentation:</strong> Recent pay stubs, tax returns, and a new appraisal (often covered by NMHL’s <em>Equity Boost</em> program for qualified borrowers).</li>
</ul>
<p>Scenario: Carlos has a $200,000 loan at 6.8 % with $120/month PMI. He refinances to a 5.75 % loan for $190,000 (no PMI). His new payment drops from $1,350 to $1,150, a $200 monthly saving. After accounting for $4,000 closing costs, his net savings begin after 20 months.</p>
<p>If you have reached the 20 % equity threshold but your lender has not yet cancelled PMI, you can submit a formal request. NMHL’s process includes:</p>
<ol>
<li><strong>Log into the NMHL borrower portal.</strong> Navigate to “PMI Management” and select “Request Cancellation.”</li>
<li><strong>Upload supporting documents:</strong> recent appraisal, proof of on‑time payments, and a copy of your original loan agreement.</li>
<li><strong>Submit and wait for verification.</strong> NMHL typically responds within 10‑14 business days.</li>
</ol>
<p>Tip: Even if you are just shy of the 20 % mark, a lump‑sum payment of the difference can trigger immediate cancellation. For a $250,000 loan, a $5,000 principal payment might push you from 78 % LTV to 77 % and eliminate PMI instantly.</p>
<p>Many borrowers assume that PMI disappears automatically as soon as they think they have enough equity. Here are the most frequent myths:</p>
<ul>
<li><strong>Myth 1:</strong> "My lender will cancel PMI as soon as my home value rises." <em>Reality:</em> Lenders base cancellation on the original purchase price unless you request a new appraisal.</li>
<li><strong>Myth 2:</strong> "I can’t cancel PMI if I have a government‑backed loan (FHA, VA)." <em>Reality:</em> FHA loans have a different insurance premium (MIP) that follows a set schedule; however, VA loans typically have no PMI at all.</li>
<li><strong>Myth 3:</strong> "Paying extra principal won’t affect PMI timing." <em>Reality:</em> Extra payments reduce the principal balance faster, moving you toward the 20 % equity threshold sooner.</li>
</ul>
<p>NMHL’s mortgage counselors can run a quick equity‑projection calculator for you, showing exactly how many extra payments or home‑value gains are needed to trigger removal.</p>
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Frequently Asked Questions
Under the Homeowners Protection Act, lenders must automatically terminate PMI when the loan reaches 78 % of the original principal balance (22 % equity) and the borrower is current on payments. This automatic cancellation typically occurs after the borrower has made at least 24 months of on‑time payments.
Borrowers can request early cancellation once they have 20 % equity based on the original purchase price, provided they have a clean payment history for the past 12 months and the loan is at least two years old. An appraisal may be required to verify the current value.
Appraisal costs vary by region but typically range from $300 to $600. NMHL’s <strong>Equity Boost</strong> program may cover the appraisal fee for qualified borrowers who are refinancing or have a credit score above 720.
Refinancing can eliminate PMI if the new loan’s LTV is 80 % or lower. Even if you have some equity, you’ll need to refinance into a loan amount that meets the 20 % equity rule or choose a lender‑paid mortgage insurance option, which may increase the interest rate slightly.
Yes. Extra principal payments directly reduce the loan balance, moving you toward the 20 % equity threshold faster. NMHL’s online payment portal lets you specify an “extra principal” amount each month, and you can see the projected PMI removal date in real time.
Once PMI is cancelled, it does not reinstate automatically if the home’s value declines. However, a lower home value could affect future refinancing options, so it’s wise to maintain a healthy equity cushion of at least 15 % to protect against market fluctuations.
NMHL offers a dedicated PMI Removal Service. Our loan officers will review your loan documents, run an equity analysis, coordinate any required appraisals, and submit the cancellation request on your behalf. You can start the process with a free, no‑obligation consultation via our website.
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