How to Remove PMI From Your Mortgage in Alabama
Key Takeaways
This post is a 4 minute read.
PMI is extra insurance you pay when your down payment is under 20 percent.
You can ask your lender to cancel PMI once you owe 80 percent of your home value.
Your lender must drop PMI automatically at 78 percent if you stay current.
A new appraisal can speed things up when your home value rises.
Refinancing can also remove PMI, but weigh the closing costs first.
PMI applies to conventional loans, while FHA mortgage insurance follows different rules.
On a $300,000 home loan, private mortgage insurance can add $115 to $375 to your monthly payment. That is money you may not have to pay forever. Many Alabama homeowners keep paying it long after they could have dropped it. This guide shows you when and how to remove it.
What PMI Really Is
PMI stands for private mortgage insurance. It protects your lender, not you, if you stop making payments. You pay it when your down payment is less than 20 percent on a conventional loan. A conventional loan is any mortgage not backed by a government program. PMI usually costs between 0.46 and 1.5 percent of your loan each year. Your credit score, down payment, and loan size all affect the rate. The good news is that PMI does not last forever. Once you build enough equity, you can have it removed. Equity is the part of your home value that you actually own. It grows as you pay down your loan or as your home gains value.
The Two Numbers That Matter
Removing PMI comes down to your loan-to-value ratio, or LTV. LTV compares what you owe to what your home is worth. If you owe $160,000 on a $200,000 home, your LTV is 80 percent. Two thresholds control when PMI goes away. At 80 percent LTV, you can request cancellation in writing. At 78 percent LTV, your lender must cancel it automatically. The 78 percent mark is based on your original purchase price or appraised value. You also have to stay current on your payments for either step to work.
How to Request Cancellation at 80 Percent
You do not have to wait for the automatic 78 percent mark. Once you reach 80 percent LTV, send your lender a written request. Federal law under the Homeowners Protection Act gives you this right. Your loan must be in good standing with on-time payments. Your lender may ask for proof that your home value has not dropped. You also cannot have a second mortgage or other lien on the property. If everything checks out, your lender removes the PMI charge. That lowers your monthly payment from then on.
Use a New Appraisal When Values Rise
Home prices across Alabama have climbed in recent years. The statewide median sale price sat near $290,000 in early 2026. Rising values can push you to 80 percent equity faster than your loan schedule alone. If you think your home is worth more, ask your lender about a new appraisal. Say you have owned the home at least five years. Your balance must be 80 percent or less of the new value. If you have owned it at least two years, that figure drops to 75 percent. An appraisal usually costs a few hundred dollars. That cost can pay for itself within a few months of dropped PMI.
Refinancing to Erase PMI
Refinancing replaces your current loan with a brand new one. If your new loan is 80 percent or less of your home value, PMI goes away. This can make sense when rates are favorable or your home value jumped. But refinancing comes with closing costs of its own. Run the math before you commit. Our guide to refinancing your mortgage in Alabama walks through the break-even point. Sometimes simply requesting cancellation is the cheaper path.
FHA Loans Follow Different Rules
Not every loan handles mortgage insurance the same way. FHA loans use something called a mortgage insurance premium, or MIP. With most FHA loans today, MIP stays for the life of the loan. The main exception is a down payment of 10 percent or more. In that case, MIP can fall off after 11 years. Many buyers refinance from an FHA loan into a conventional loan to escape MIP. This only helps once you have enough equity to skip PMI on the new loan.
What This Means for Alabama Homeowners
Putting less than 20 percent down is common and often a smart move. Waiting years to save a full 20 percent can cost you more as prices rise. You can read more in our look at down payment myths. The key is to track your equity after you buy. Mark your calendar for when you expect to hit 80 percent. A quick call to your lender can confirm your current LTV. At Breeze Mortgage, we help buyers in Tallapoosa County and across Alabama plan this from day one.
Frequently Asked Questions
How much can removing PMI save me each month?
Most homeowners save between $100 and $300 a month. The exact amount depends on your loan size and your original PMI rate.
When can I ask my lender to cancel PMI?
You can request cancellation once you owe 80 percent of your home's value. You must also be current on your payments.
Does my lender remove PMI automatically?
Yes. By law, your lender must cancel PMI when your balance reaches 78 percent of the original value. This holds as long as you stay current.
Can a higher home value help me drop PMI sooner?
Yes. A new appraisal showing more equity can qualify you for early cancellation. How long you have owned the home affects the LTV you need.
Can I remove PMI from an FHA loan?
Usually not by request. Most FHA loans carry mortgage insurance for the life of the loan. Refinancing into a conventional loan is the common fix.
Is PMI ever worth paying?
Often, yes. PMI lets you buy sooner with a smaller down payment. You can remove it later once you build enough equity.
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Breeze Mortgage is powered by Edge Home Finance, LLC. NMLS #891464. Equal Housing Lender. This content is for informational purposes only and is not a commitment to lend. All loans are subject to credit approval, underwriting guidelines, and property eligibility requirements. Down payment assistance programs, availability, eligibility requirements, and funding are subject to change without notice. Contact Breeze Mortgage for current program details and to determine what options may be available for your specific situation.
