The 78% Rule vs. the 80% Rule: Two Triggers, One Big Difference

Both numbers come from the same law (the Homeowners Protection Act), and both are measured against your home's original value (the lesser of purchase price or original appraisal). But they work completely differently, and confusing them is expensive.

The 80% rule: your right, your move

At 80% loan-to-value, you get the right to request cancellation. The key word is request: nothing happens automatically. You send a written request; the servicer verifies you're current with a good payment history, may check that the value hasn't declined and that no junior liens exist, and then cancels.

Most people don't know this right exists, which is precisely why it goes unused.

The 78% rule: their obligation, automatic

At 78% LTV (based on your scheduled amortization, not extra payments), the servicer must terminate PMI on its own. No letter, no appraisal, no request. The only requirement is that you're current on payments (if you're not, it terminates when you become current).

The difference in dollars

On a typical loan, the gap between hitting 80% and hitting 78% on the normal payment schedule is many months to a couple of years. If your PMI is $150/month and the gap is 14 months, waiting passively for automatic termination instead of sending a letter at 80% costs you about $2,100, for skipping one piece of mail.

That's the whole point of knowing both rules: 78% is the safety net. 80% is the opportunity. Never wait for the net.

Two fine-print points worth knowing

1. Extra principal payments count for the 80% request: if you've prepaid your way to 80% of original value, the right is yours now, even though the automatic 78% trigger runs on the scheduled amortization date.
2. The midpoint backstop: at the halfway mark of your loan term, PMI must end regardless of LTV (if current). Relevant mostly to loans with small down payments and slow amortization.

And the rule beyond both rules

Both triggers ignore what your home is worth today. If you've owned for 2+ years in an appreciating market, the current-value path may beat both federal triggers by years.

Educational content, not financial advice. Confirm specifics with your servicer.