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Whether you’re a first-time homebuyer or a seasoned homeowner, understanding private mortgage insurance (PMI) is an essential step on your homeownership journey. At Westerra Credit Union, we’re here to support you every step of the way — from the Rockies to the plains, we’ve got you covered. Let’s break down PMI and show you how you can work toward eliminating it — because you’ve got this, and your dream home is within reach!
PMI, is designed to protect your lender if you’re unable to make your mortgage payments. If you’re putting down less than 20% on your home, PMI is usually required. But don’t worry — it’s a temporary part of the process that helps you buy your home with a smaller down payment.
PMI is typically rolled into your monthly mortgage payment, but here’s the good news: it’s not permanent! As you pay down your mortgage and the value of your home increases, you’ll build equity. Once your loan balance hits 78% of your home’s original value, PMI will be automatically canceled. No action is required from you (other than keeping up with your payments!). If you’ve made improvements to your home or its value has gone up, you might even be able to request PMI cancellation once your equity hits 20%.
PMI makes it easier to own a home, even with a smaller down payment. Whether you're buying your first home in Denver or refinancing in the foothills, PMI helps get you into your dream space faster — without needing a huge down payment. That means more adventure and less waiting!
The best part is, you don’t have to live with PMI forever! As you build equity, there are several ways to eliminate it. Let’s break it down:
Once your principal loan balance reaches 78% of your home’s original value, your PMI will be automatically canceled. This is based on the original value of the home, so no paperwork is needed (other than making sure you stay current on your payments!).
If you’ve made improvements or if the market value of your home has gone up, you might be able to request PMI cancellation based on the current value of your home:
2–5 Years: If you’ve had your loan for 2–5 years, your loan-to-value (LTV) ratio must be under 75% to request PMI cancellation.
More Than Five Years: If your loan has been in place for more than five years, you can request PMI cancellation once your LTV ratio hits 80% based on your home’s current value.
Pro Tip: If you’ve made major home improvements (think mountain-view deck or kitchen remodel), your PMI termination request could be approved earlier — even if you’ve had your loan for less than two years!
You can also request PMI termination when your principal balance reaches 80% of the original value of the home. This usually applies if you’ve made large lump sum payments, such as from selling a home or putting extra money toward your loan.
On-Time Payments Matter: To qualify for PMI cancellation, all of your mortgage payments need to be on time.
Home Valuation: When you request PMI cancellation, your lender will arrange a home appraisal to determine your property’s current value. While your lender orders the appraisal, you’ll be responsible for paying for it. Just a heads-up: you’ll need to rely on the lender’s appraisal — you can’t submit your own!
From the foothills to the peaks, your dream home in Colorado is within reach. Whether you're refinancing to ditch PMI or buying your first (or next) home, Westerra Credit Union is here to help. We’re excited to help you unlock the door to your future — and we’ll be with you every step of the way.
Already have a mortgage and have questions? Give us a call!
Loan approval is subject to credit approval and program guidelines. Credit Union membership required. Interest rate and program terms are subject to change without notice. Please contact a Westerra Credit Union mortgage loan officer at 303-321-4209 for more details. Westerra Credit Union NMLS 421606. Private mortgage insurance information provided is for primary residences only and does not apply to investment and second homes. Information regarding PMI is accurate as of 3/18/2025 and is subject to change at any time without notice. For the most updated information, reference 12 U.S. Code § 4902 - Termination of private mortgage insurance
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