Removing PMI: The Three Paths Texas Homeowners Can Use
One question I hear from Texas homeowners almost every week is some version of: when can I stop paying PMI? Private mortgage insurance adds anywhere from $80 to $300 per month to your payment depending on loan size and credit score, and most people want it gone as soon as possible. The good news is that there are three distinct paths to remove it, and significant home appreciation across Texas in recent years means some borrowers qualify sooner than they expect.
Here is how each path works, what the rules require, and how to figure out which one makes the most sense for your situation.
First: Understand When PMI Applies
PMI is required on conventional loans when the down payment is less than 20% of the home’s purchase price, or when the borrower’s equity falls below 20% at origination. It protects the lender, not the borrower, in the event of default. Despite benefiting only the lender, the cost is paid by the borrower each month.
PMI does not apply to VA loans (no mortgage insurance ever), USDA loans (they use a different guarantee fee structure), or FHA loans (FHA uses mortgage insurance premiums with its own set of removal rules). This article focuses on conventional loan PMI specifically.
FHA MIP operates differently: for loans originated since June 2013 with less than 10% down, MIP runs for the life of the loan. The only way to remove it in that case is to refinance into a conventional loan once you have enough equity. That is effectively a fourth path worth knowing, but it applies to FHA borrowers rather than conventional PMI situations.
Path 1: Automatic Cancellation at 78% LTV
The Homeowners Protection Act of 1998 requires lenders to automatically cancel PMI on conventional loans once the loan balance reaches 78% of the original purchase price. This is the baseline protection that applies regardless of whether you ask or not.
The key word is “original” purchase price, not current appraised value. If your home has appreciated significantly since purchase, the automatic cancellation based on original price will happen later than it would if calculated on current value. It will happen eventually based on your amortization schedule, but it may be slower than your other options.
On a 30-year conventional loan at 7%, a borrower who puts 5% down reaches 78% LTV based on the original purchase price after approximately 10 to 11 years of payments. That is a long time to pay PMI if faster options are available.
Path 2: Request Early Cancellation at 80% LTV
The Homeowners Protection Act also gives borrowers the right to request PMI cancellation once the loan balance drops to 80% of the original purchase price. The lender must honor this request if:
- Your payment history is good (typically no 30-day lates in the prior 12 months)
- Your loan balance has reached 80% of original purchase price through payments, or through a combination of payments and documented appreciation
- The property value has not declined below the original purchase price
Some lenders require a new appraisal to confirm current value before accepting an early cancellation request based on appreciation. The borrower typically pays for this appraisal, which runs $500 to $700 in most Texas markets.
If your lender allows you to use current appraised value, and your home has appreciated, this path can remove PMI years ahead of the automatic cancellation schedule. A Texas homeowner who bought in 2020 at $350,000 with 5% down may find that appreciation pushed the current value to $450,000 or more, dropping the current LTV well below 80%.
Path 3: Refinance Into a New Loan Without PMI
The third path is to refinance the mortgage entirely. If your home has appreciated enough that the new loan amount would be 80% or less of the current appraised value, you can refinance into a conventional loan with no PMI requirement. This works even if your original purchase price was higher relative to your current balance.
The advantage of refinancing over requesting early cancellation is that you simultaneously get a new interest rate. The math needs to account for both the PMI savings and the change in rate.
Example: You have a $350,000 loan at 7.5% with $200 per month in PMI. Your home is now worth $500,000, putting your LTV at 70%. If you can refinance to 6.75%, the monthly payment drops and you eliminate PMI. The refinance closing costs of roughly $8,000 divided by the combined monthly savings gives your break-even, which you compare to your expected stay-in timeline. See what closing costs typically look like on Texas mortgage transactions.
If current interest rates are higher than your existing rate, the PMI savings alone may not justify the cost of refinancing. In that scenario, Path 2 is the better approach if your lender will accept a cancellation request based on current appraised value.
Texas-Specific Context
Texas home values in many markets appreciated 40% to 60% between 2019 and 2022, and while values have pulled back from their peaks in some Austin submarkets, gains in San Antonio, Houston suburbs, and Dallas-Fort Worth have held better. For borrowers who purchased in 2019, 2020, or early 2021, the appreciation may have already pushed them past the 80% LTV threshold on current value.
If you bought in Texas during that period with less than 20% down, it is worth getting a current market value estimate and running the LTV math. You might be paying PMI on a loan that no longer requires it relative to your home’s current value, and a written request to your servicer (or a new appraisal) might eliminate the cost.
For Texas homeowners with FHA loans, the refinance path is typically the only option for eliminating mortgage insurance, since FHA MIP on post-2013 loans with less than 10% down is permanent. See the full comparison of FHA vs. conventional for Texas buyers.
How to Start the Process
- Contact your loan servicer and ask what documentation they require for a PMI cancellation request.
- Get a current estimate of your home’s value from a real estate agent or formal appraisal.
- Calculate your current LTV: divide your remaining loan balance by the current home value.
- If LTV is at or below 80%, submit a written cancellation request to your servicer.
- If LTV is above 80%, calculate how many months until you hit 80% through amortization, and consider whether appreciation or a refinance makes sense in the interim.
What is the difference between PMI cancellation at 80% versus 78% LTV?
At 80% LTV of original purchase price, you have the right to request cancellation. The lender must honor a valid written request but does not cancel automatically. At 78% LTV, the Homeowners Protection Act requires automatic cancellation whether you request it or not. Requesting at 80% can save the months it takes to reach 78% through amortization.
Can I remove PMI based on my home’s current appraised value rather than the original price?
It depends on your lender and loan servicer. Some lenders allow PMI removal based on current appraised value if you have owned the home for at least two years and have a strong payment history. Others only allow cancellation based on the original purchase price. Check your loan documents and call your servicer to confirm their policy.
Does Texas law provide any additional PMI protections beyond federal rules?
The federal Homeowners Protection Act is the primary law governing PMI cancellation and applies in all states including Texas. Texas does not have separate state-level PMI removal requirements beyond the federal baseline, but Texas regulators enforce HPA compliance for loans on Texas properties.
How do I find my current loan balance?
Your monthly mortgage statement or your servicer’s online portal will show the current unpaid principal balance. You can also request a payoff statement, which shows the exact amount needed to pay off the loan as of a specific date.
If I refinance to remove PMI, does my new loan require a new appraisal?
Yes. All refinance transactions require a new appraisal to establish current property value for the new loan. This appraisal also confirms that your new LTV is at or below 80% so PMI is not required on the refinanced loan. Appraisals in Texas currently cost $500 to $700 for standard single-family properties.
If you are paying PMI and want to know whether you qualify to remove it, reach out to me directly and I will run the numbers for your loan and current home value. It takes about five minutes, and for some homeowners the savings start within a few weeks.
Anthony Ferrando | Mortgage Loan Originator | NMLS# 1919613 | Ferrando Financial LLC NMLS# 2403080 | Licensed in Texas. This is not a commitment to lend. Loan approval is subject to credit, income, and property qualifications. PMI cancellation rules are governed by the Homeowners Protection Act and individual loan servicer policies. Equal Housing Lender.
