Removing PMI can be a smart way to lower your monthly mortgage payment. In order to do so, you need to show your lender that your home has enough equity. That process often starts with an appraisal. Whether you’re requesting early removal, waiting out the full term, or just curious how close you are to dropping PMI based on your loan’s equity, an appraisal can give you a clear picture. Let’s break it down:
How Much Equity Do You Need to Remove PMI?
If you want to cancel PMI early, you will need to provide proof that you’ve built up at least 20% equity in your home. Why? Because PMI exists to protect lenders if the borrower stops or is unable to make payments. But once you’ve reached that 20% mark, the risk drops and your lender no longer requires PMI.
Here is how to estimate your home’s equity:
- Home appraises for $400,000
- Loan balance: $310,000
- Equity: $400,000-$310,000 = $90,000
- Equity percentage: $90,000 / $400,000 = 22.5%
TAG Tip: This is where ordering a private home appraisal can come in handy. It can provide you with a clear, updated picture of your home’s current market value before you approach your lender and initiate the PMI removal process.
Do I Have to Refinance to Remove PMI?
Not necessarily. Though it may be a good idea to do so if:
- Your current interest rate is high: Refinancing can remove your PMI and lower your interest rate, saving you more overall.
- You plan to stay in your home for several years: This gives you more time to recover from refinance closing costs and benefit from lower mortgage payments.
More often than not, lenders will order an AVM (automated valuation model) to estimate your home’s equity. AVMs utilize property data and algorithms to generate a quick and low-cost estimate. While they are a low-lift solution, AVMs often miss key details like:
- Recent renovations
- Current physical property condition
- Expert local market insight
In contrast, a full appraisal includes an in-person inspection and a thorough analysis of comparable sales completed by a real person, not a computer. That difference can unlock more equity and give you absolute financial clarity.
Why Paying for an Appraisal Now Can Save You Hundreds Later
Before you start the PMI removal process, one of the best steps you can take is to order a private appraisal. Yet, many homeowners don’t realize just how powerful this can be. It helps you:
- Confirm whether you've hit 20% equity
- Avoid unneccessary back and forth with your lender
- Know exactly where you stand before applying
The average PMI payment ranges from $100-$300+ per month, which means you could be spending $1,200-$3,000+ per year, on top of your mortgage.
By comparison, a one-time private appraisal typically costs between $350-$450, depending on your local market and type of appraisal report. That’s often less than two months of PMI for many homeowners.
If that price feels out of reach, consider a desktop appraisal for half the price. While it doesn’t include an in-person inspection, it’s still completed by a certified appraiser who reviews your local market data and comparable sales. It’s a more affordable way to get a credible, professional valuation, without sacrificing quality or validity.
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