Conventional Loan PMI Cancellation Rules for a Condo Owner

The Quick Read: A condo does not get its own PMI rule. A one-unit condo that is your home or second home follows the same cancellation tests as a house. You can ask to drop mortgage insurance when your balance is scheduled to hit 80% of the original value. The servicer must end it automatically at 78%. Where condo owners get tripped up is valuation, liens, and occupancy.

Private mortgage insurance (PMI) is the coverage a conventional lender requires when you put down less than 20%. It protects the lender, not you. You pay the premium monthly, and you want it gone as soon as the rules allow.

Key Terms Defined

Original value: The lower of the purchase price or the appraised value on a purchase. On a refinance, it is the appraised value.

LTV (loan-to-value): Your loan balance divided by the home’s value, shown as a percentage.

Seasoning: How long you have held the loan. Current-value requests usually need a minimum age.

Junior lien: A second claim on the property, such as a home equity line or second mortgage.

Servicer: The company that collects your payment and handles the PMI request.

BPO (broker price opinion): A value estimate from a real estate professional, usually cheaper than a full appraisal.

Do Condo Owners Follow the Same Rules?

Yes, with one big condition: the unit must be a one-unit property that is your primary residence or second home. Fannie Mae’s Servicing Guide treats these rules by unit count and occupancy, not by condo versus house.

The occupancy part matters most. A condo used as an investment property gets stricter current-value tests and no 78% automatic termination. It ends automatically only at the loan’s amortization midpoint, which is year 15 of a 30-year loan. The same goes for a two- to four-unit condo building you live in.

If you bought as a second home and later rented the unit out, tell your servicer and ask which category your loan sits in. Occupancy affects the tests, and servicers apply the rules to the loan as they have it coded.

How PMI Actually Ends: Four Routes

Here is the full picture. The first three come from federal law, the Homeowners Protection Act (HPA). The fourth is a set of investor rules.

The CFPB explains that these protections cover single-family principal residences on loans closed on or after July 29, 1999. Some servicers allow removal under their own standards beyond that.

The 80% Request, Step by Step

Wholesale conventional programs I place files with require mortgage insurance above 80% LTV. They let you ask for cancellation at 80% of original value. The steps look like this. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.

1. Find your date. Your closing paperwork includes a PMI disclosure showing the projected 80% and 78% dates.

2. Send a written request. Phone calls start the conversation. Writing makes it a request the servicer must answer.

3. Show a good payment record. Investor guides, as summarized by a mortgage insurer’s flier, look for no 30-day late in the past 12 months and no 60-day late in the past 24. Confirm the exact test in the guide or with your servicer.

4. Certify no junior liens. A home equity line or second mortgage can block the request.

5. Prove value has not dropped. The servicer may ask for an appraisal or similar evidence that the unit is not worth less than its original value.

If you meet all four conditions, the servicer must grant the request. A denial for an HPA-covered loan has to be explained in writing. Extra principal payments can pull your request date forward, which is one way to speed things up.

Automatic Termination at 78%

At 78% of original value, based on the scheduled balance, the servicer must end PMI if you are current. If you are behind, it ends once you catch up. The compliance exam procedures from NCUA add that the servicer may not charge PMI more than 30 days after cancellation requirements are met or after termination.

Here is a common misconception. Extra payments do not speed up the automatic date. It runs on the original schedule. They help only a request you make yourself.

Using Appreciation: The Current-Value Route

If your condo has gained value, you may not need to wait for the schedule. Fannie Mae and Freddie Mac let you request cancellation based on a new valuation. The tests get tighter than the federal baseline.

On a one-unit primary residence or second home, the Fannie Mae and Freddie Mac current-value tests run on a sliding scale:

• Loan seasoned between 2 and 5 years: LTV must be 75% or less.
• Loan seasoned more than 5 years: LTV must be 80% or less.
• Seasoning waived for substantial improvements: LTV must be 80% or less.

Freddie Mac’s Guide section 8203.2 adds that for improvements, the value must come from an appraisal or BPO done after the work, stating what was done, what it cost, and how it changed value. Appraisal or BPO fees are generally the borrower’s cost.

For condo owners, improvements usually means work inside your own unit: kitchen or bath renovations, added finishes, or more living area. Ordinary repairs that only maintain the unit do not count. Common-area work funded through your association is a separate question, so ask your servicer before counting on it.

Fannie Mae has also let servicers proactively contact borrowers who may be eligible on current value, per Lender Letter LL-2026-07. Your own request still works, so do not wait for a letter.

Where Condo Owners Get Tripped Up

The rules are the same. The friction is practical. These are the spots that slow condo files.

The valuation measures more than your unit. A valuation generally reflects comparable condo sales and the condition of the project, not just your unit. Deferred maintenance, special assessments, or a soft local condo market can pull a value below what your unit’s finishes suggest. That can sink a request that looked safe on paper.

Don’t order your own appraisal first. Servicers often dictate the method, the vendor, or the form. Ask what they will accept before you spend money.

Liens are the second trap. The no-junior-lien certification is aimed at second mortgages and home equity lines. Whether an unpaid HOA assessment or an association lien gets treated the same way is a question for your servicer. Clear any delinquent dues before you apply, so there is nothing to argue about.

Late payments reset the clock. A single recent 30-day late can stall a request even when your equity is plenty.

Project rules don’t change cancellation. Whether your building was approved under a full or limited condo review affected how your loan was originated. It does not change the PMI termination tests. Fannie Mae’s eligibility matrix does note lower LTV limits can apply to some condo purchases depending on project type, but that is about the purchase, not cancellation.

Which Route Fits Your Situation?

Picture a borrower who bought a one-unit condo with 5% down on a conventional loan and has held it for six years. Prices in the building have risen. Under the current-value route, the borrower needs the new valuation to show an LTV of 80% or less. That is a different test from the HPA’s original-value test, and it is the investor’s rule, not a federal right. A borrower three years in would face the tighter 75% figure. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.

Is a refinance better? Sometimes. It resets the original value to a new appraisal, which can help if values rose a lot. But it brings a new loan, new costs, and new terms, so compare it against simply requesting removal. Dropping PMI lowers your monthly cost, and for condo owners already carrying HOA dues, it is one of the few line items you can control.

If the Servicer Says No

Ask for the denial in writing, with the reason stated. Common reasons are a missed payment, a junior lien, or a valuation that came in low. Each has a different fix.

• Low valuation: Ask whether you can submit a different type of evidence, or wait and retry as the market moves.
• Payment history: Count forward until the screen clears, then ask again.
• Lien issue: Pay off or subordinate the second claim, or consider whether refinancing makes sense.

Keep copies of every letter and your request. Once cancellation takes effect, check your next statement to confirm the premium stopped. If the servicer keeps charging, you can file a complaint with the CFPB.

Does This Apply to FHA or Lender-Paid Insurance?

No. The HPA covers borrower-paid PMI. FHA mortgage insurance premium follows separate rules, handled in a different section of the Fannie Mae guide. Lender-paid mortgage insurance is also generally outside the HPA, based on mortgage insurer summaries, so confirm with your servicer. Loans closed before the 1999 effective date sit on a different footing too.

Buying a Condo Now? Plan the Exit From PMI

Across the wholesale programs I place files with, a standard purchase on a principal residence goes to 95% LTV, and 97% for qualifying first-time buyers, with mortgage insurance above 80% that cancels at 80% and ends at 78%. Second homes go to 90% leverage. Those figures are subject to lender guidelines and full file review.

Two habits help condo buyers later. Keep your PMI disclosure with your closing papers, so you know your dates. And avoid opening a home equity line you might not need, since it can block your request. For a deeper look at skipping mortgage insurance at larger balances, Lendmire’s piece How Jumbo Loan No-PMI Lane Rules Work for a Condo Purchase covers that path. If you are still comparing options, Lendmire’s conventional loan programs page lays out how these loans are structured.

If you are buying a home and want to see whether a conventional loan fits your file, Lendmire can help you compare the options and what each one asks of the file.

For your own numbers, request a scenario review with Lendmire.

About Lendmire

Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. Fannie Mae Servicing Guide B-8.1-04: Termination of Conventional Mortgage Insurance

2. CFPB – When can I remove PMI from my loan?

3. NCUA – Homeowners Protection Act exam procedures

4. Freddie Mac Guide Section 8203.2

5. Fannie Mae Lender Letter LL-2026-07