What is PMI and why does it exist?
Private mortgage insurance (PMI) is a policy that protects your lender — not you — if you default on your loan. Lenders typically require it when you put down less than 20% of the purchase price, because a smaller down payment means the lender is exposed to more risk. PMI is added to your monthly payment and is calculated as an annual percentage of either the original loan amount (most common) or the outstanding balance, depending on your policy type.
The Homeowners Protection Act and automatic cancellation
The Homeowners Protection Act of 1998 (HPA) is the federal law that governs PMI cancellation for conventional single-family loans. It establishes two important rights:
Automatic termination. Your servicer must automatically cancel PMI when your scheduled amortization — the normal paydown of your loan according to your original payment schedule — brings your balance to 78% of the original purchase price. You do not need to request this; the servicer is legally required to do it. Note that "original purchase price" means the value at closing, not the current market value.
Borrower-requested cancellation. You have the right to request PMI cancellation in writing once your balance reaches 80% of the original property value (or appraised value, depending on your servicer's policy). The lender may require you to demonstrate a good payment history and, in some cases, obtain a new appraisal showing that the property value has not declined. This 80% threshold is what this calculator uses as its primary target, because it is the point where you can act — not just wait.
How this calculator works
The simulation starts from your current balance and applies your scheduled monthly payment (calculated from the remaining term and current balance) plus any extra payment you specify. Each month, it checks whether the resulting balance has fallen to or below 80% of the effective property value. If you enter a home appreciation rate, the effective property value grows each month using a monthly compounding rate, which raises the 80% threshold and can accelerate removal.
The total PMI cost is simply the monthly PMI amount multiplied by the number of months until removal.
How to request early cancellation
Once your balance reaches 80% of the original value through your regular payments, you can submit a written request to your servicer. Your servicer may require that you: - have a good payment history (no 30-day late payments in the past year, no 60-day late payments in the past two years) - provide evidence that the property value has not declined below the original value - in some cases, obtain an appraisal at your expense
If your home has appreciated substantially, a new appraisal may show that your current LTV is already below 80% even if your loan balance has not dropped that far based on the original value. This is a separate process from HPA-mandated cancellation and is governed by your loan agreement and investor guidelines.
Extra payments as an accelerant
Making additional principal payments each month directly reduces your balance and can meaningfully shorten the time until PMI is removed. The "months saved" figure in the results shows the reduction in PMI duration from your specified extra payment. Because you stop paying PMI sooner, the savings compound: you avoid both the PMI premiums and the interest you would have paid on the balance that the extra payment eliminates.