Seattle Mortgage & Housing Market Insights

Originally published August 26, 2022, by Sam Kader, NMLS #130505. Updated September 18, 2026.

Homebuyers who make a down payment of less than 20% on a conventional mortgage are often required to pay Private Mortgage Insurance (PMI).

PMI protects the lender—not the homeowner—if the borrower defaults on the loan. Although PMI adds to the monthly housing payment, it may allow a buyer to purchase a home sooner without waiting to save a 20% down payment.

We may also have financing options that avoid a separate monthly PMI payment. However, these programs may involve a different interest rate, an upfront cost, a second mortgage, or another tradeoff. It is important to compare the complete cost of each option before deciding which financing structure is most appropriate.

The Homeowners Protection Act of 1998, which became effective in 1999, established federal requirements for PMI disclosures, borrower-requested cancellation, and automatic termination on many conventional mortgages. The CFPB bulletin, issued on August 4, 2015, further clarified certain mortgage-servicing requirements under the law.

Important: These federal protections generally apply to borrower-paid PMI on conventional loans secured by a principal residence. Different requirements may apply to investment properties, second homes, lender-paid mortgage insurance, high-risk loans, and government-insured mortgages.

Four Possible Ways to Remove PMI

1. Request Cancellation Based on the Property’s Original Value

You may generally request PMI cancellation when the unpaid principal balance reaches—or is scheduled to reach—80% of the property’s original value.

For a purchase loan, the original value is generally the lower of:

• The original purchase price; or
• The appraised value when the mortgage was originated.

For a refinance, the original value is generally the appraised value used when the refinancing mortgage was originated.

To qualify, you will generally need to submit a written request, have a satisfactory payment history, remain current on the mortgage, and show that the property has not declined below its original value. Your servicer may require an appraisal or another acceptable form of property valuation.

Making additional principal payments may allow you to reach the 80% threshold sooner. However, PMI does not necessarily disappear immediately after an extra payment, so you should contact your mortgage servicer and formally request cancellation.

2. Automatic Termination at 78% of the Original Value

For many conventional mortgages, PMI must automatically terminate on the date the loan balance is first scheduled to reach 78% of the property’s original value, provided the borrower is current on the mortgage.

This calculation is generally based on the loan’s original amortization schedule—not the home’s current market value and not necessarily the actual balance created by making additional principal payments.

If the borrower is not current on the scheduled termination date, PMI must generally be terminated after the mortgage becomes current.

There is also a final-termination rule. If PMI has not already been cancelled or automatically terminated, it generally must end by the midpoint of the loan’s amortization period, provided the borrower is current. For example, the midpoint of a 30-year mortgage is generally after 15 years.

3. Request Cancellation Based on the Home’s Current Value

Some mortgage investors and servicers permit PMI cancellation based on the property’s current market value rather than its original value. This may help Seattle-area and Washington homeowners whose properties have appreciated significantly.

The servicer may require:

• A minimum period of ownership;
• A satisfactory mortgage-payment history;
• A new appraisal, broker price opinion, or other approved valuation;
• No subordinate liens; and
• A specific current loan-to-value ratio.

The required equity and ownership period can vary. A servicer or mortgage investor may require more than 20% equity when the loan is relatively new.

Do not order an appraisal independently unless your servicer instructs you to do so. The servicer may require the valuation to be ordered through its own approved process.

4. Use Documented Home Improvements to Support a Higher Value

Substantial home improvements—such as adding living space or completing a major kitchen or bathroom renovation—may increase the property’s market value.

Depending on the mortgage investor’s guidelines, documented improvements may allow the servicer to consider PMI cancellation sooner or under a different loan-to-value requirement. Ordinary maintenance and minor cosmetic work may not qualify.

Keep permits, contracts, invoices, receipts, photographs, and other records of completed improvements. Before paying for an appraisal, ask your servicer whether substantial improvements affect its ownership-period or equity requirements.

How to Request PMI Cancellation

1. Contact your mortgage servicer. Ask for its written PMI-cancellation requirements and the date on which you may become eligible.
2. Confirm which property value will be used. Ask whether eligibility will be based on the property’s original value or its current market value.
3. Request cancellation in writing. Follow the servicer’s instructions and retain a copy of your request.
4. Maintain a satisfactory payment history. Borrower-requested cancellation generally requires timely payments and a current loan.
5. Confirm whether subordinate liens are permitted. A home-equity loan, home-equity line of credit, or other junior lien may affect eligibility.
6. Use the servicer’s valuation process. The servicer may require an appraisal or another approved valuation at the homeowner’s expense.

You should receive periodic or annual information from your mortgage servicer explaining whom to contact regarding mortgage-insurance cancellation.

You can obtain a preliminary estimate of your home’s value through Zillow or contact me for a comparative market analysis. An online estimate or comparative market analysis may help you decide whether to contact your servicer, but it does not replace a valuation required by the servicer.

PMI and FHA Mortgage Insurance Are Not the Same

PMI generally applies to conventional loans. FHA loans use Mortgage Insurance Premiums, commonly called MIP, and follow different cancellation rules.

For many FHA loans with case numbers assigned on or after June 3, 2013:

• If the original loan-to-value ratio was greater than 90%, annual MIP generally continues for the mortgage term.
• If the original loan-to-value ratio was 90% or less, annual MIP generally continues for 11 years.

Older FHA loans may follow different cancellation rules depending on the FHA case-assignment date, original loan-to-value ratio, loan term, and other factors.

Homeowners with FHA financing can learn more about FHA mortgage insurance. Depending on the circumstances, refinancing into Conventional Financing may eliminate FHA mortgage insurance.

Refinancing is not automatically beneficial. Homeowners should compare the new interest rate, closing costs, monthly savings, remaining loan term, and break-even period before replacing an existing mortgage.

Should You Refinance Solely to Remove Mortgage Insurance?

If you currently have a favorable interest rate, replacing the mortgage solely to eliminate mortgage insurance may increase your total borrowing cost.

Before refinancing, compare:

• Your current interest rate and monthly PMI or MIP;
• The proposed interest rate and monthly payment;
• Closing costs and prepaid expenses;
• The time required to recover those costs;
• How long you expect to keep the mortgage; and
• Whether your current servicer can remove PMI without refinancing.

In some cases, requesting PMI cancellation through the existing servicer may be more economical than refinancing the entire loan.

What If the Servicer Denies Your Request?

Ask the servicer to provide the reason for the denial in writing, including the applicable valuation, payment-history, ownership-period, lien, or loan-to-value requirement.

If you believe your servicer is not following applicable PMI-cancellation requirements, you may submit a complaint to the Consumer Financial Protection Bureau or contact the Washington State Attorney General’s Office.