Quick Answer
To avoid PMI (US), start with 20% down or use combo loans. To remove it early, reach 80% LTV via extra principal and request removal or re-appraisal; it cancels automatically at 78% (certain loans). In Canada, insurer premiums are built in; you can't "remove" them, but a refi at ≤80% LTV eliminates new insurance.
How PMI works (US) and when it auto-cancels
PMI Basics:
- Required when down payment < 20% (80% LTV or higher)
- Protects lender, not borrower, against default
- Costs 0.3–1.5% of loan amount annually
- Paid monthly, upfront, or combination
| PMI Removal Rules | Conventional | FHA (MIP) |
|---|---|---|
| Auto-cancellation | 78% LTV, on-time payments | 11 years + 78% LTV |
| Request removal | 80% LTV, may need appraisal | Not available if <10% down |
| Upfront MIP | Not applicable | 1.75% of loan amount |
Tactics to reach 80% LTV fast (prepayments, value-add, re-appraisal)
Ways to Build Equity Faster
- Extra principal payments: Target PMI removal date and calculate monthly amount needed
- Lump-sum payments: Tax refunds, bonuses, inheritance toward principal
- Home improvements: Kitchen, bathroom, additions that boost appraised value
- Market appreciation: Rising home values in your area
- Re-appraisal: If market has risen significantly since purchase
Example calculation: $400,000 home, $320,000 loan (80% LTV)
Target loan balance: $320,000 × 0.80 = $256,000
Current balance: $315,000
Need to pay down: $315,000 - $256,000 = $59,000
Timeline: 2 years = $59,000 ÷ 24 = $2,458/month extra
Loan recast vs. refinance
Loan Recast
- How: Make large principal payment, lender recalculates payments
- Cost: $150–500 fee typically
- Rate: Stays the same
- Best for: Keeping current rate, just lowering payments
Refinance
- How: New loan replaces old loan
- Cost: 2–5% of loan amount in closing costs
- Rate: Current market rates
- Best for: Better rate available, cash-out, term change
Canada: insured mortgages—how premiums work; options at refi
Canadian Mortgage Insurance:
- Required for down payments < 20%
- Providers: CMHC, Sagen (formerly Genworth), Canada Guaranty
- One-time premium: 2.8–4.0% of loan amount
- Usually added to mortgage principal (financed)
| Down Payment | Premium Rate | $400k Home Example |
|---|---|---|
| 5–9.99% | 4.00% | $15,200 |
| 10–14.99% | 3.10% | $10,850 |
| 15–19.99% | 2.80% | $8,960 |
At renewal/refinance: If you've built 20%+ equity, new mortgage doesn't need insurance.
Beware lender overlays & portfolio rules
Potential Roadblocks
- Seasoning requirements: Some lenders require 2+ years before PMI removal
- Payment history: Must have perfect payment record
- Property type restrictions: Condos, investment properties may have different rules
- Appraisal requirements: Lender may require full appraisal vs. AVM
- Portfolio loans: Lender sets own rules, may not follow standard PMI cancellation
Frequently Asked Questions
Can PMI be tax-deductible?
In the US, PMI deduction was available in some years but often expires. Check current tax law or consult tax professional.
Is it worth paying for recast vs waiting?
Compare recast fee vs monthly PMI savings. If PMI is $200/month, $250 recast fee pays off in ~1.5 months.
When should I get an appraisal for PMI removal?
When home values in your area have risen significantly, or you've made major improvements. Cost is $300–600 but could save thousands in PMI.