If you bought with less than 20% down on a conventional loan, you are almost certainly paying private mortgage insurance (PMI) — a monthly premium that protects the lender, not you, and typically runs 0.3% to 1.5% of the loan per year. Extra principal payments can end that premium years early. Here is how the loan-to-value math works and exactly what to do.
What loan-to-value (LTV) means
LTV is your loan balance divided by the home's value:
LTV = current loan balance ÷ property value
Put 10% down and you start at 90% LTV. As you pay principal (scheduled or extra), the balance falls and LTV drops. PMI exists to cover the gap while LTV is high; once you have enough equity, it can come off.
The two thresholds that matter
Under the federal Homeowners Protection Act (HPA), for a conventional loan on a primary residence:
| LTV | What happens | Based on |
|---|---|---|
| 80% | You may request PMI cancellation in writing | The original value (lower of purchase price or original appraisal), following the loan's amortization schedule — or sooner if you prepaid |
| 78% | The servicer must automatically terminate PMI | The original value and the original amortization schedule, provided your payments are current |
| Midpoint of the loan term | PMI must end if still in force (e.g., year 15 of a 30-year loan), if current | Time, not equity |
The key point for prepayers: the 80% request right is explicitly available when extra payments bring your balance down faster than the schedule. You do not have to wait for the scheduled date.
How extra payments accelerate it
Say you bought for $400,000 with 10% down: a $360,000 loan, 90% LTV. To reach 80% LTV against the original value you need the balance at $320,000; to hit the 78% automatic point, $312,000.
- On the scheduled amortization of a 30-year loan at 6.5%, getting from $360,000 to $320,000 takes roughly 4–5 years.
- Add $500/month in extra principal and you get there in roughly 2.5–3 years.
- A single $20,000 lump sum in year 1 gets you most of the way there immediately.
Every month of PMI you skip is real money — on a $360,000 loan at 0.5% PMI, that is about $150/month, or $1,800 a year. Use the extra payment calculator to find the month your balance crosses your target, then count the PMI premiums between the scheduled date and that month.
Requesting cancellation at 80%: the steps
- Ask your servicer, in writing, for the exact balance that equals 80% of the original value, and the documentation they require. Use the secure message center so there is a log.
- Get current and stay current. The HPA request right requires a good payment history and no other liens (a second mortgage or HELOC can block it).
- Reach the target balance through scheduled plus extra payments.
- Submit the written cancellation request. The servicer may require a broker price opinion or new appraisal (at your cost, often $100–$600) to confirm the home has not lost value.
- Confirm the removal on your next statement and that the premium stopped. Any unearned premium you prepaid should be refunded.
Using current (higher) value instead of original value
If your home has appreciated, you may be able to cancel PMI based on current value rather than original value — often at 75% or 80% current LTV, sometimes after a minimum seasoning period (commonly 2 years, or 5 years if you are relying on appreciation beyond normal paydown). This is a servicer/investor policy (Fannie Mae and Freddie Mac each publish their own rules), not an HPA right, so ask specifically: "Can I cancel PMI based on a new appraisal showing current value?" Combining appreciation with extra principal payments is often the fastest route.
FHA loans are different
FHA loans carry MIP (mortgage insurance premium), not PMI, and the rules are stricter:
- For most FHA loans with less than 10% down, MIP lasts the life of the loan — extra payments will not remove it.
- With 10% or more down, MIP can drop off after 11 years.
- The usual way out of lifetime MIP is to refinance into a conventional loan once you have 20%+ equity. Extra principal payments help you get to that equity sooner, at which point a refinance ends the insurance.
VA loans have no monthly mortgage insurance at all (just a one-time funding fee). USDA loans have an annual fee that behaves like FHA MIP.
Types of PMI and how removal differs
| Type | How you pay | Can extra payments remove it? |
|---|---|---|
| Borrower-paid monthly PMI (BPMI) — the most common | A monthly premium added to your payment | Yes — cancel by request at 80% LTV, automatic at 78%. This is the case this guide focuses on. |
| Lender-paid PMI (LPMI) | Built into a higher interest rate for the life of the loan | No — there is no separate premium to cancel. The only exit is a refinance. |
| Single-premium PMI | One upfront lump sum at closing (sometimes financed) | Nothing to cancel monthly; if financed, extra payments reduce that balance like any other principal. |
| Split-premium PMI | A smaller upfront amount plus a reduced monthly premium | The monthly portion follows the BPMI cancellation rules. |
If you are not sure which you have, check your closing disclosure or ask your servicer. Borrowers with LPMI who make aggressive extra payments to build equity are really building toward a refinance, not a cancellation.
A month-by-month example
$400,000 purchase, 10% down, $360,000 loan at 6.5%, 30 years, BPMI at 0.5% ($150/month). Original-value 80% LTV target: $320,000 balance.
| Approach | Month balance hits $320,000 | PMI paid until then | PMI saved vs. schedule |
|---|---|---|---|
| Scheduled payments only | ~month 56 | ~$8,400 | — |
| +$300/month extra principal | ~month 38 | ~$5,700 | ~$2,700 |
| +$600/month extra principal | ~month 28 | ~$4,200 | ~$4,200 |
| $18,000 lump sum in month 2 | ~month 6 | ~$900 | ~$7,500 |
Figures are approximate and assume the servicer honors the request promptly once you reach 80%. Remember you must still submit the written request at 80%; only the 78% automatic termination happens without asking.
Is killing PMI the best use of the money?
Often yes, because PMI removal is a guaranteed return with a clear finish line. Removing $150/month of PMI by getting from 82% to 80% LTV is an excellent, bounded use of a few thousand dollars. But keep the basics first: emergency fund, employer match, high-interest debt. And once PMI is gone, re-evaluate whether further extra payments beat investing — see pay off early vs. invest. Make sure the extra actually reduces principal: applying extra payments to principal.