PMI removal calculator: how close the 80% line is
Private mortgage insurance (PMI) is charged on many conventional mortgages when the down payment is under 20%. It is not meant to be permanent. Federal rules set loan-to-value (LTV) lines at which a borrower can ask for it to be cancelled and at which it must end automatically, and many servicers also allow removal based on a higher current home value. The PMI Removal Decoder works out where a loan sits against each of those lines and what reaching them is worth.
The decision it answers
The tool answers when PMI can come off a conventional loan and by which route: by paying the balance down against the original value, or by using a higher current value supported by an appraisal or broker price opinion. For the value route, it also answers whether paying for that appraisal is worth it, by dividing its cost by the monthly PMI it would remove.
How the tool computes it
Two loan-to-value figures
calc() divides the current balance by the original purchase price for the LTV the federal rules use, and by your estimate of today's value for the LTV the value-based route uses. It then sets the 80% line at the price times 0.80 and the 78% line at the price times 0.78.
Months to each line
paymentsToReach() amortizes the balance forward month by month at your rate and principal-and-interest payment until it drops to each target, capped at 1,200 months. If the payment does not cover the interest, it reports the line as unreachable by projection and shows only the principal still needed.
The appreciation path
When today's LTV is at or below 80%, the tool treats the value-based route as open. Appraisal payback is the appraisal cost divided by monthly PMI, rounded up to whole months, and the first-year net is twelve months of PMI minus the appraisal cost.
Worked example
These inputs are hypothetical, not a real person or account. The results were produced by running the tool's own calculation code on them.
- Original purchase price: $350,000
- Original loan: $332,500
- Current balance: $300,000
- Estimated current value: $400,000
- Monthly PMI: $140
- Rate and monthly P&I: 6.75%, $2,157
- Appraisal or BPO cost: $550
- Against the original price, $300,000 divided by $350,000 is an LTV of 85.7%. Against the estimated current value, $300,000 divided by $400,000 is 75.0%.
- The 80% request line is a balance of $280,000, which is $20,000 of principal away. At the stated payment, the tool projects roughly 39 payments, about 3 years 3 months.
- The 78% automatic line is a balance of $273,000, $27,000 away, or about 50 payments.
- On current value the loan is already under 80%, so the value-based path is open in this example.
- A $550 appraisal divided by $140 of monthly PMI pays back in 4 months. Twelve months of PMI is $1,680, so twelve months of PMI minus the appraisal cost is $1,130.
In this hypothetical, the balance route is about 39 payments away, while the value route breaks even on the appraisal in 4 months.
Assumptions and limits
- The federal Homeowners Protection Act of 1998 rules apply to most conventional loans on a primary residence. FHA, VA and USDA loans and investment properties follow different rules; the tool notes that on most FHA loans taken out after June 2013 with less than 10% down, MIP lasts for the life of the loan.
- Original value is taken from the purchase price you enter. Under the Act it is the lesser of the sale price and the appraised value at origination, which can be lower.
- The current value is your estimate. A servicer decides value-based cancellation using its own appraisal or BPO and its investor guidelines, which can include seasoning and payment-history requirements the tool does not check.
- Projections assume the same payment every month with no extra principal. Extra principal can bring the 80% request date closer, but the 78% automatic termination date follows the original amortization schedule, so prepayments do not move it; the tool projects 78% from your current balance, which matches the schedule only if no extra principal has been paid.
- The midpoint rule (PMI ends at the halfway point of the amortization schedule, after 15 years on a 30-year loan, if payments are current) is explained but not used to change the projected months.
Sources for the rules on this page
Run it with your own numbers
The PMI Removal Decoder is free, but it needs a free Obsidian Metrics account: signed-out visitors are sent to sign in first.
Frequently asked
When can PMI be removed on a conventional loan?
Under the Homeowners Protection Act of 1998, a borrower can request cancellation once the balance is scheduled to reach, or has actually reached, 80% of the original value. The request must be in writing, the borrower needs a good payment history and must be current, and the lender can require evidence that the property value has not declined below the original value and that there are no subordinate liens. PMI must end automatically on the date the balance is first scheduled to reach 78% of the original value under the original amortization schedule, if payments are current. The tool shows both lines in dollars and estimates the months to each.
Can a higher home value get PMI removed sooner?
Many servicers allow value-based cancellation using a new appraisal or broker price opinion, under their own and their investor's guidelines. The tool computes LTV on your estimated current value and shows whether that route looks open and how fast the appraisal cost pays back.
Does this work for FHA mortgage insurance?
No. FHA loans carry MIP, not PMI, and the tool explains that on most FHA loans taken out after June 2013 with less than 10% down, MIP lasts for the life of the loan. The appreciation math applies to conventional PMI.
What does the appraisal payback number mean?
It is the appraisal or BPO cost divided by the monthly PMI that would stop, rounded up to whole months. In the worked example, $550 divided by $140 is 4 months.
Does the tool contact my servicer?
No. It sends nothing anywhere. It can produce a status summary and a cancellation request letter that you can copy or print and send yourself.
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Talk it through
The free Obsidian Metrics community on Skool is where members discuss decisions like this one and the frameworks behind them. It is education, not personal advice.