When Can a Homeowner Request PMI to Be Cancelled?
Once your loan balance drops to the threshold your lender sets for PMI, you can request cancellation in writing.
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The Loan-to-Value Threshold
PMI can be requested once your loan balance drops to the percentage of the home's original value that your lender sets as the cutoff. Your loan documents or servicer can tell you that number and when you are projected to reach it.
Request Must Be In Writing
Paying down the balance doesn't cancel PMI by itself. You have to send your loan servicer a written request. Some lenders have a form for this, so call and ask what they need before you send anything.
A New Appraisal May Help
If your home's value has gone up, you might reach the cancellation threshold sooner than scheduled. Lenders usually want a new appraisal you pay for to confirm the current value before approving early cancellation.
Automatic Cancellation Backstop
Even without a request, federal law requires PMI to end automatically once your balance reaches a set percentage of the original value, as long as payments are current. This is separate from homeowners insurance and doesn't affect your dwelling coverage.
Get the Right Dwelling Coverage Now
PMI is about your loan, not your house. What matters for closing is a policy that covers what rebuilding actually costs, not what you paid for the home. Compare quotes before you sign anything.
Does PMI Have Anything to Do With Homeowners Insurance?
PMI and homeowners insurance are two separate requirements. Lenders check for both, but for different reasons. PMI protects the lender if you default on the loan. Homeowners insurance protects the physical house, and by extension the lender's stake in it, from fire, wind, theft and other covered damage. Dropping PMI someday has no effect on whether you need a homeowners policy. You carry that coverage for as long as you own the house, and typically for as long as there's a mortgage on it.
At closing, your lender will want to see a declarations page or binder showing your homeowners policy is in force. If your down payment was small enough to require PMI, proof of that coverage gets checked too. These show up as separate line items on your closing disclosure. They're sometimes paid together through an escrow account, which is why people assume they're the same thing. They aren't. Your escrow account can hold funds for insurance premiums, property taxes and PMI all at once, each paid out on its own schedule.
One place the two do overlap is the appraisal. The same appraisal that sets your home's value for the loan is often the number your lender later uses to calculate the loan-to-value threshold for canceling PMI. It's worth keeping a copy of that initial appraisal, along with any inspection report. You may need to reference the home's value again years down the road when you ask for PMI to be dropped.
None of this changes what you're shopping for right now. The homeowners policy you bind before closing needs to cover the cost of rebuilding the house, not the purchase price and not the loan amount. PMI sorts itself out later, on its own timeline, once your balance drops enough. What you lock in today is the coverage that protects the house itself, and that's worth getting right before you sign anything.
What Happens If You Refinance Before PMI Drops Off?
Refinancing resets the clock on PMI. The new loan is treated as its own transaction, with its own appraisal and its own loan-to-value calculation. If your new loan balance is still above the cancellation threshold on the new appraisal, PMI can come back even if you were close to dropping it on the old loan. Some homeowners refinance to get a lower rate and find they've added PMI back in, or extended how long they'll pay it.
Refinancing can also work in your favor if home values have risen since you bought the house. A new appraisal that comes in high enough might put you under the threshold right away, meaning the new loan doesn't require PMI at all. Whether that happens depends on the appraisal and the lender's specific cutoff. It's worth asking the lender to run the numbers before you commit to refinancing just to see where you'd land.
Homeowners insurance works differently here. Refinancing doesn't change what coverage you need, since the house hasn't changed. Your new lender will still want to see a current declarations page or binder at closing on the refinance, just like your original lender did. If your dwelling coverage is already set at the right rebuilding cost, there's nothing to redo. It's a good moment to check that the coverage amount still reflects what rebuilding would cost now, since construction costs tend to rise over time even when the loan terms change.
A refinance touches PMI and homeowners insurance in different ways. One gets recalculated from scratch, using a fresh appraisal and a fresh balance. The other just needs to still be in place and still adequate for what rebuilding costs today. Keeping track of which is which saves confusion when the lender's closing checklist lists both.
Before You Lock In Coverage
Check your declarations page for the dwelling coverage amount and compare it to what rebuilding the house would actually cost today, not the purchase price. Get that number right before closing.
