Does PMI get removed earlier if your home appraises higher?

[David Y M.]

So just a hypothetical situation. What if your home appraises for higher than ask price? Does that get built into equity to remove PMI Faster if I put 10% down. Seems like a simple math equation that 80% of the spread would get built into the bank equity of the home. My lender requires 12 months of payments, but does is this really how PMI would get removed?

"To remove PMI, or private mortgage insurance, you must have at least 20% equity in the home. You may ask the lender to cancel PMI when you have paid down the mortgage balance to 80% of the home's original appraised value. When the balance drops to 78%, the mortgage servicer is required to eliminate PMI."

Link: https://www.foxbusiness.com/features/how-to-dump-pmi-asap

			Loan Balance	Down Payment
Ask Price	200,000.00	0.90	180,000.00	20,000.00
Appraised Price	220,000.00	0.80	176,000.00	44,000.00
		Principal Paydown Remove PMI	4,000.00

[Andrew Postell]

@David Y M. yeah, as mentioned above your lender will keep that PMI based on your purchase price....well, 99% of the time. I cannot speak for all lenders here obviously but that is the industry practice. So often times you will have to refinance to get it removed. However, refinancing JUST to remove the PMI is usually not a benefit enough to do so. Usually you want your rate lower as well.

Just as a side bar, this is for PMI on a conventional (Fannie/Freddie) loan. As with FHA, even when you hit your 20% equity PMI will stay with your loan. So refinancing out of an FHA loan might have an extra benefit.

Hope all of this makes sense but feel free to ask anything additional if you need.  Thanks!