You can remove PMI (Private Mortgage Insurance) once your home reaches 20% equity, and a professional appraisal is how you prove it to your lender. If your home has appreciated since purchase, this could save you $100-$300 every month.
What Is PMI?
PMI protects the lender, not you.
If you default and the lender forecloses, PMI covers the loss.
It's insurance the lender requires when you put down less than 20%.
Cost: 0.5% - 1.5% of loan amount annually.
Example:
- Loan: $400K
- PMI rate: 0.5%
- Annual PMI: $2,000 ($167/month)
That's added to your mortgage payment.
PMI Removal Requirements
To remove PMI, you typically need:
- 20% equity (or more)
- Good payment history
- Home value must not have declined
How do lenders verify you have 20% equity?
Option 1: Automatic removal - When principal balance reaches 80% of original purchase price (automatic, no appraisal).
Option 2: Request removal - When you've reached 20% equity through appreciation or extra payments (requires appraisal).
The Appraisal Role
To request PMI removal based on home appreciation:
You provide a current appraisal showing the home's value.
Example:
- Original purchase price: $400K
- Original loan: $320K (80%)
- PMI was added because you put 20% down
- 5 years later...
- Home appraised at: $480K
- Loan balance: $280K
- Loan-to-value: 280K / 480K = 58.3%
- You're now at 41.7% equity
You easily exceed 20% equity. PMI can be removed.
Cost vs. Savings
Appraisal cost: $500-$700
Potential PMI savings:
- $150/month = $1,800/year
- Your appraisal pays for itself in 4 months
- In 10 years: $18,000 in savings
This is one of the highest-ROI appraisals you can get.
The Process
- Contact your lender
- Request PMI removal with appraisal
- Order appraisal (typically $500-$700)
- Provide appraisal to lender
- Lender verifies 20% equity
- PMI removed (typically within 30 days)
Timeline: 2-3 weeks total.
Lender-Ordered Appraisal
Some lenders require they order the appraisal (can't use your own).
Cost: Varies, but typically $300-$600.
Either way, the appraisal proves your equity and supports PMI removal.
PMI Duration
By law, PMI must be removed when:
- Loan balance reaches 80% of original purchase price (automatic)
- You request it (with proof of 20% equity)
You don't have to wait 15 years for automatic removal.
You can request it once you have equity.
Why Homeowners Don't Remove PMI
Many homeowners don't realize they can remove PMI.
They pay PMI for years unnecessarily.
If you've lived in your home 5+ years and home values are up:
Check if you're eligible for PMI removal.
You might be paying $200/month for insurance you don't need.
My Advice
- Track your home value (Zillow, Redfin, tax assessment)
- Track your loan balance (mortgage statement)
- Calculate your loan-to-value: Loan balance / Home value
- When you reach 80%, contact your lender
- If you're close (90-95%), get an appraisal
- Remove PMI and save thousands
Bottom Line
PMI removal appraisals are high-impact.
A $600 appraisal can save $200+/month in insurance.
It's one of the most valuable appraisals you can order as a homeowner.
If you're paying PMI and your home has appreciated:
Don't wait. Get the appraisal. Remove the insurance.
It's money in your pocket.