If you put less than 20% down on a conventional loan, you're paying private mortgage insurance every month. PMI, as everybody calls it, does nothing for you. It protects the lender if you stop paying. On a $400,000 loan it often runs somewhere between $100 and $250 a month. That's a car payment going out the door for a policy you will never file a claim on.
A federal law called the Homeowners Protection Act gives you two exits. The first one you ask for. Once your balance hits 80% of the original value, you can request cancellation in writing. Original value means the purchase price or the first appraised value, whichever was lower, and it does not move when the house goes up. The second exit is automatic. The servicer has to drop the PMI at 78% of that same original value, based on the payment schedule you started with rather than on what you've actually paid down. So the automatic one shows up on the servicer's timeline. The request is the one you control.
Which is what makes it a chunking target. A chunk that lands your balance at 79% of the original value, plus a written cancellation request the same week, can end the PMI years early. Run the numbers first, because the comparison here is unusually easy. Take the monthly PMI and multiply it by the months you'd otherwise keep paying it. Set that against the interest you'll owe on the chunk until you've paid it back.
The junior lien condition is the one that catches people running this strategy. A junior lien means any loan against the house that sits behind the first mortgage, and a line of credit secured by your home is exactly that. Most servicers list no junior liens among their cancellation requirements. Some enforce it strictly and won't cancel while your line of credit is open. Some only care about the balance you've drawn. Some never ask at all. Call your servicer before the chunk. Ask them to mail you their written PMI cancellation requirements, and read the junior lien language yourself. It's a five-minute call that decides whether the chunk buys what you wanted.
The other conditions are ordinary. You have to be current on payments. You need a good payment history, which usually means no payments 30 days late in the past year and none 60 days late in the past two. And you don't need a new appraisal as long as you're using the original value. If you want to use today's value instead, because the house went up rather than because you paid it down, that's a different request. Lenders make you wait a certain number of years first, the wait varies by who owns your loan, and you pay for the appraisal. Ask what they require before you order one.
None of this applies to FHA. An FHA loan charges a mortgage insurance premium rather than PMI, the Homeowners Protection Act doesn't cover it, and on most loans written after June 2013 with less than 10% down that premium lasts the whole life of the loan. The only way out is refinancing into a conventional loan, which makes it a rate decision as much as an insurance decision.
Send the request in writing even if you also call. Date it, keep a copy, and follow up in two weeks. Servicers lose things, and the written request is what starts the clock.