Timely Topic: Is Now the Time for Homeowners To Dump Their PMI?

07.22.2025

Sky-high home prices might be good news for recent homebuyers looking to cut costs: They might be able to dump their private mortgage insurance (PMI).

Julie Lynch, director of the Herbert D. Weitzman Institute for Real Estate at The University of Texas at Dallas’ Naveen Jindal School of Management, said people who bought homes during or before the COVID pandemic might qualify to stop paying their PMI, thanks to soaring home values over the past five years.

What Is PMI?

Many lenders require private mortgage insurance when a buyer puts down less than 20% for a home. For example, if a home is purchased for $400,000 but a buyer doesn’t invest at least $80,000 up front, lenders will often wrap PMI into the monthly mortgage payment. Homebuyers pay PMI on conventional loans, but not on government-backed mortgages such as Federal Housing Administration loans.

“PMI protects the lender should a borrower default on the mortgage,” Lynch said.

Private mortgage insurance typically costs between 0.5% and 1.5% of the original loan amount per year. The cost can depend on the down payment and the loan amount as well as the type of mortgage and a homeowner’s credit score, according to the Texas Department of Insurance.

Rising Home Values

Since 2020, home values have increased substantially in many areas of the U.S. In Texas, values have gone up about 50%, according to the National Association of Realtors.

If a homeowner has lived in their home for at least two years, has a solid payment history, and the value has increased to where the owner now has 20% equity in the house, there’s a good chance they could dump their PMI, Lynch said.

For example, if an owner’s home is worth $400,000 and their mortgage balance is $300,000, they have $100,000, or 25%, in equity.

“The bank isn’t going to call and say, ‘Great news, your house value went up,’” Lynch said “Homeowners need to take the initiative and evaluate their circumstances.”

How To Eliminate PMI

People can request a desktop appraisal for about $150 to $200 to find out what their home is currently worth. This is less expensive than a standard appraisal by the mortgage lender, which can cost between $350 and $700, Lynch said.

“When you buy a house, an appraiser is required to come out to see the property,” Lynch said. “A desktop appraisal is done from a desk without a visit. They perform market research and find comparable sales to determine the value of your home.”

The lender conducts the desktop appraisal and notifies the borrower if they qualify for the removal of PMI.

With home insurance costs increasing, dropping PMI can save as much as $150 to $250 a month, Lynch said.

“With prices going up on everything else, it is worth looking at where you can cut back,” she said.

–Veronica Gonzalez

Note to journalists: Julie Lynch is available for news media interviews. Contact Veronica Gonzalez, 972-883-4358, veronica.gonzalez@utdallas.edu.