When starting as a homeowner, paying private mortgage insurance (PMI) might be necessary to get the keys. But after a few years of making steady payments, it feels more like a bill that gives you nothing in return. It doesn't build equity. It doesn't help your credit. And it certainly doesn't benefit you directly.

The good news is that PMI doesn’t have to stick around forever. If you’ve got a conventional loan, there are clear ways to drop it—some automatic, others that need your action. Knowing how and when to remove PMI on your conventional loan can free up your budget and bring peace of mind.

When and Why is PMI Required?

Private mortgage insurance is usually required when a homebuyer puts down less than 20% on a conventional loan. The logic from the lender’s side is simple: a smaller down payment means a higher risk, so PMI helps cushion potential losses. The cost of PMI typically ranges from 0.3% to 1.5% of your original loan amount per year and is added to your monthly mortgage payment. It doesn’t help you build equity faster. It doesn’t lower your interest rate. It’s just there to protect the lender in case you default.

You might have agreed to PMI because it made buying a home sooner possible. That's a fair trade-off at the start. But once you've chipped away at your balance or your home's value has climbed, continuing to pay for PMI can feel frustrating. The trick is knowing when you've crossed the line into being eligible to drop it—and making sure your lender follows through.

Canceling PMI Through Equity Milestones

One of the most straightforward ways to remove PMI on your conventional loan is by reaching 20% equity in your home based on the original purchase price. You've paid the loan to 80% of that price. Once there, you can submit a written request to your lender to cancel PMI. This doesn't happen automatically—you need to speak up.

Lenders usually require that your mortgage payments have been on time for the past year or two, and some might ask for proof that your home hasn’t declined in value. This may mean paying for an appraisal, which typically costs a few hundred dollars. But if that confirms your home is holding steady or increasing in value, you’re one step closer to dropping the extra payment.

Your lender is legally required to remove PMI automatically once you reach 22% equity—so long as you're up to date on payments. That's calculated based on the original purchase price and only applies if you follow the original payment schedule (no missed or interest-only periods). But again, if you want it off at 20%, you'll need to make the request yourself.

Using Appreciation or Improvements to Your Advantage

Home values have climbed quickly in many markets over the past few years. If your house is worth more now than when you bought it, that new value can be used to prove you’ve hit the equity threshold—even if you haven’t paid off as much of the loan as expected.

Say you bought your home for $300,000, now worth $360,000. If your loan balance has dropped to $288,000, that's 20% equity based on the new value—not the old one. But you'll usually need a professional appraisal to use appreciation as your argument. Some lenders also have seasoning requirements, so you may have to wait at least two years before using increased value to cancel PMI.

Home improvements can also play a role. If you've upgraded your kitchen, added a bathroom, or made other changes that increased the value of your property, those count too. But you'll still need to prove it through an appraisal or broker price opinion. Each lender may handle this process differently, but the steps generally include a formal request, documentation of your loan balance, and an updated home valuation.

Refinancing to Eliminate PMI

Suppose your current mortgage terms don't give you much flexibility. In that case, refinancing might offer another way to remove PMI—especially if your credit score has improved or your home has significantly appreciated in value over the past few years. Refinancing into a new conventional loan with a lower balance relative to your home's worth can make PMI unnecessary from day one.

This path often works best if you plan to stay in the home long enough to recover the closing costs of a new mortgage. Refinancing isn't free—there are appraisal fees, origination charges, and other expenses—but if you're shedding PMI and potentially getting a better interest rate, it can be worth the math depending on your financial goals.

There are cases where refinancing isn't ideal—like if interest rates are higher now than when you first got your mortgage, your income has changed, or if you're close to reaching 20% equity through regular payments anyway. In that case, it may make more sense to stick with your current loan and request PMI removal through one of the other options mentioned earlier.

Conclusion

Getting rid of PMI on your conventional loan isn't complicated, but it requires little effort. Whether you've reached 20% equity through your regular payments, watched your home appreciate beyond expectations, or improved its value, you have a few ways to make your case. The important thing is to understand your loan terms, know your current equity position, and take the steps to follow through. PMI may have helped you get your foot in the door, but you don't have to keep paying for it once it’s no longer needed. With a little planning, you can drop that extra monthly charge and put that money back toward your future goals.