What Is PMI, and How Do You Get Rid of It?

Private mortgage insurance is one of the few line items on a mortgage statement that buys you nothing.

That's not a criticism — it's just what it is. PMI is an insurance policy on your loan, paid by you, that pays out to your lender if you default. You are funding someone else's protection against your own failure. If you stop paying your mortgage, PMI does not help you keep the house, reduce what you owe, or cover your payments.

What makes it worth understanding rather than resenting is that it's temporary, it's governed by clear federal rules, and the difference between knowing those rules and not knowing them is a few thousand dollars.

A note before you start: this is general education, not personalized financial or legal advice. Examples use 6.65% for a 30-year loan — the Freddie Mac Primary Mortgage Market Survey average for the week of August 20, 2026 — and a 0.75% annual PMI rate. Your PMI rate, your lender's specific procedures, and your loan's exact amortization will differ. The federal rules described here apply to most conventional loans on primary residences; confirm your own loan's terms with your servicer.

1. Why PMI exists at all

A lender's worst case isn't that you miss a payment. It's that you stop paying entirely, they foreclose, and the house sells for less than you owe.

Your down payment is the buffer against that. Put 20% down and the lender has substantial room — the home could lose a fifth of its value and they'd still recover the loan. Put 5% down and that cushion nearly disappears; a modest price decline plus foreclosure costs puts them underwater.

PMI is how lenders make the second scenario acceptable. An insurer takes on part of that loss exposure, and you pay the premium. The result is that borrowers who can't produce 20% can still get a conventional loan at a competitive rate — which, for most first-time buyers, is the entire point. Without it, the practical minimum down payment on a conventional mortgage would be far higher than it is.

So the honest framing is: PMI is the fee for not waiting years to save 20%. Whether that fee is worth paying is a real question, and section 7 works through it.

2. What PMI actually costs

PMI is quoted as an annual percentage of your loan amount, charged monthly. Rates commonly run 0.5% to 1.0% per year, driven mainly by two things: your credit score and how far below 20% your down payment is. A borrower with a 780 score putting 15% down pays near the bottom of that range; a 640 score at 3% down pays near the top.

Our calculators default to 0.75% — the midpoint of that range — when a specific figure isn't supplied.

Here's what it looks like on a $400,000 home with 10% down:

The PMI line is $225 a month — about $2,700 a year. Note that it's calculated on the loan amount ($360,000 × 0.75% ÷ 12 = $225), not on the home's price or on the amount by which you fell short of 20%.

Two structural details worth knowing:

• PMI doesn't shrink as you pay down the loan. Most policies fix the premium based on the original loan amount, so the $225 stays $225 until it cancels entirely. It doesn't taper.
• It's usually not tax-deductible. The deduction for mortgage insurance premiums has lapsed and been retroactively revived several times over the past decade. Don't assume it applies without checking the current year's rules with a tax professional.

3. The two federal thresholds that end it

This is the part worth reading carefully, because the two rules do different things and only one of them happens on its own.

The Homeowners Protection Act governs PMI on most conventional loans for primary residences. It creates two separate rights:

Automatic termination at 78% LTV. Your servicer must cancel PMI, without you asking, on the date your loan balance is scheduled to reach 78% of the home's original value — provided you're current on payments. "Scheduled" is important: this is based on your original amortization schedule, not your actual balance. Paying extra doesn't move this date by itself.

Borrower-requested cancellation at 80% LTV. You have the right to request cancellation once your balance reaches 80% of original value. The servicer must honor it if you're current, have a good payment history, and the property hasn't declined in value (they may require an appraisal to confirm that). This one requires you to act.

There's also a backstop: at the midpoint of your loan's amortization period — 15 years into a 30-year loan — PMI must end regardless of your LTV, if you're current. This rarely matters on a standard loan, which reaches 78% long before then, but it protects borrowers on unusual structures.

"Original value" generally means the lesser of your purchase price or the appraised value at the time of purchase. That definition is why appreciation doesn't automatically help — more on that in section 5.

4. The specific month it ends on a real loan

Abstract thresholds are less useful than dates. Here's the same $400,000 home at 10% down — a $360,000 loan at 6.65% over 30 years, starting at 90% LTV:

A few things fall out of this that are genuinely useful:

It takes about eight years. Ninety-seven payments to reach the 80% mark. That's much longer than most buyers assume — a consequence of how little early payments reduce principal (on this loan, the first payment puts only about $281 toward the balance).

The gap between the two thresholds is worth $3,150. Fourteen months at $225. If you wait for automatic termination rather than requesting cancellation the moment you're eligible, that's what it costs — and the only difference between the two outcomes is whether you made a phone call.

Progress is slow, then less slow. Three years in, that loan's balance is $347,445.26 — an LTV of 86.86%, with 61 more payments to the request threshold. You'll have paid $8,100 of PMI by then and still have $13,725 to go on the current schedule.

The practical advice: find out your own date now, not in year seven. Our PMI removal calculator takes your original value, loan amount, rate, term, and months elapsed, and returns both dates plus what PMI will cost you between now and each one. Then put the earlier date in a calendar.

5. Getting there faster

Three routes exist, and they work differently.

Extra principal payments

Paying extra reduces your actual balance, which gets you to the 80% request threshold sooner. It does not move the 78% automatic date, which follows the original schedule regardless.

This is a case where the request right is worth real money. If you've been paying extra and hit 80% two years early, nobody will tell you — the servicer is watching the amortization schedule for their automatic obligation, not your actual balance for your optional one. You have to ask.

Appreciation and a new appraisal

If your home's value has risen, your equity position is better than your amortization schedule suggests. But because the federal thresholds are pegged to original value, appreciation doesn't trigger them.

What it can do is support a request based on current value. Servicers generally will consider this, typically requiring a new appraisal at your expense (commonly a few hundred dollars) and often applying stricter equity requirements — many require 25% equity rather than 20% if the loan is less than five years old. The specifics vary by servicer and by whether your loan follows Fannie Mae or Freddie Mac guidelines, so ask yours directly what their standard is before paying for an appraisal.

The arithmetic is usually favorable: a $400–$600 appraisal that ends a $225 monthly premium pays for itself in about three months. Our PMI calculator can estimate your current value using your state's recent appreciation rate, as a starting point for whether an appraisal is even worth ordering — it's an estimate to inform the decision, never a substitute for the appraisal itself.

Refinancing

If you refinance into a new loan and your equity is at or above 20% of the new appraised value, the new loan simply won't carry PMI. This can be worth doing when rates have moved in your favor anyway — but refinancing purely to escape PMI rarely makes sense, because closing costs typically dwarf the remaining premiums. Check with our refinance guide before treating it as a PMI strategy.

6. FHA loans are a different system

Everything above describes conventional loans. FHA loans use a separate structure with its own name — mortgage insurance premium (MIP) — and materially worse cancellation terms:

• An upfront premium, typically 1.75% of the loan amount, usually financed into the loan.
• An annual premium, charged monthly, in a range that depends on your loan amount, term, and LTV.
• Critically: for most FHA loans originated today with less than 10% down, MIP lasts the entire life of the loan. There's no 78% cancellation. With 10% or more down, it drops off after 11 years.

The practical consequence: for an FHA borrower, the only way to remove mortgage insurance is usually to refinance into a conventional loan once you have 20% equity. That's a real cost worth factoring into the FHA-versus-conventional decision up front — FHA's easier credit requirements are genuinely valuable, but the insurance is permanent in a way conventional PMI is not.

VA loans, for eligible veterans and service members, carry no ongoing mortgage insurance at all — they have a one-time funding fee instead. USDA loans have their own guarantee fee structure.

7. Is it worth avoiding?

The instinct to "wait until I have 20%" is understandable and frequently wrong. Work the actual numbers.

Buying now at 10% down on our $400,000 example costs $225 a month for 97 months — about $21,825 if you cancel on schedule.

Against that, waiting means: continuing to pay rent, not building equity, and accepting whatever prices and rates do in the meantime. Saving another $40,000 at, say, $1,000 a month takes over three years. If prices rise even 3% a year over that period, the same house costs about $37,000 more — which is most of the PMI you were avoiding, except now it's permanently in your loan balance rather than a temporary premium.

That calculation flips in the other direction too. If you're six months from 20%, waiting is usually obvious. If prices in your area are flat or falling, waiting is stronger. If your PMI rate is at the high end because of your credit score, improving the score first can lower both the PMI rate and the interest rate.

The point isn't that buying with PMI is always right. It's that "PMI is wasted money" is an incomplete thought — the comparison is against the cost of the alternative, not against zero.

One thing that genuinely doesn't help: taking a piggyback loan (an 80/10/10 structure with a second mortgage covering part of the down payment) without comparing its total cost. Second mortgages carry higher rates and their own closing costs, and unlike PMI they don't cancel automatically.

8. Five things to do about your PMI

1. Find your two dates now. Request-eligible and automatic-termination. They're computable from your original loan terms, and knowing them turns a vague annoyance into a scheduled event.
2. Calendar the 80% date, not the 78% one. The automatic date takes care of itself. The earlier one is worth $3,150 in our example and requires you to act.
3. Check your statement for what you're actually paying. PMI should be a separate line. If you can't find it, call your servicer and ask for the rate and the projected cancellation dates in writing.
4. If you've made extra payments, ask early. You may have reached 80% well ahead of schedule, and nobody is monitoring that on your behalf.
5. If your area has appreciated substantially, ask about a value-based removal — including what equity threshold your servicer requires and whether they'll accept a broker price opinion instead of a full appraisal.

9. How to actually make the request

The 80% right is worth $3,150 in our example, and claiming it takes a specific sequence rather than a phone call.

Confirm you've reached the threshold. Your balance against the home's original value — the lesser of purchase price or original appraised value. Your statement shows the balance; the original value is on your closing documents.

Write to your servicer, don't just call. Most require a written request. Include your loan number, the property address, a clear statement that you're requesting PMI cancellation under the Homeowners Protection Act, and the current balance. Keep a copy and send it in a way you can prove.

Expect conditions. Servicers may require a good payment history — typically no payment 30 days late in the past year and none 60 days late in the past two — and confirmation that the property hasn't declined in value, which may mean an appraisal or broker price opinion at your expense.

If you're asking early based on appreciation, ask two questions before paying for anything: what equity percentage do they require (often 25% rather than 20% if the loan is under five years old), and will they accept a broker price opinion instead of a full appraisal? The answers determine whether the exercise is worth the fee.

If they refuse, ask why in writing. Servicers must follow the federal rules. If you've met the conditions and are current, a refusal should be explainable. The Consumer Financial Protection Bureau accepts complaints about servicers who don't comply.

Verify it actually came off. Check the next statement. The premium should be gone and your payment lower by that amount. If your taxes and insurance are escrowed, the total payment change may look different from the PMI amount alone — our escrow guide explains why.

One thing not to do: don't stop paying the premium unilaterally while you wait. Cancellation takes effect when the servicer processes it, not when you decide you qualify.

Frequently asked questions

What does PMI actually cost per month? Typically 0.5%–1.0% of your loan amount per year, divided by 12. On a $360,000 loan at 0.75%, that's $225 a month. Your rate depends mostly on your credit score and down payment size.

When does PMI go away automatically? At 78% loan-to-value based on your original amortization schedule and the home's original value, provided you're current on payments. On our example loan that's month 111.

Can I cancel PMI early? Yes — you have the right to request cancellation at 80% LTV, and you can potentially go earlier using a new appraisal if your home has appreciated. Both require you to contact your servicer; neither happens on its own.

Does paying extra principal remove PMI sooner? It gets you to the 80% request threshold sooner, so yes — but only if you then ask. It does not move the automatic 78% date, which follows the original schedule.

Does PMI go away if my house goes up in value? Not automatically. The automatic thresholds use the home's original value. Appreciation can support a request for early removal, but you'll generally need to pay for an appraisal and meet your servicer's equity requirement, which is often 25% for newer loans.

Is PMI the same thing as homeowners insurance? No, and they're easy to confuse. Homeowners insurance covers your home against damage and is required for the life of the loan. PMI covers the lender against your default and cancels once you have enough equity.

Does FHA mortgage insurance ever cancel? For most FHA loans written today with under 10% down, no — it lasts the life of the loan, and refinancing into a conventional loan is the usual way out. With 10% or more down it ends after 11 years.

Should I avoid PMI by waiting until I have 20% down? Sometimes. Compare the total PMI you'd pay (about $21,825 in our example) against rent paid while saving, equity not built, and likely price and rate movement over the same period. If you're close to 20%, waiting often wins; if you're years away, it often doesn't.

What to do next

Find your own dates. Our PMI removal calculator takes your original home value, loan amount, rate, term, and how many months you're into the loan, and returns the month you become eligible to request cancellation, the month it terminates automatically, and the total PMI remaining on each path.

From there:

• Payment calculator — see how PMI fits into your complete monthly payment.
• Your monthly mortgage payment, explained — the full anatomy of the payment PMI sits inside.
• How much house can you afford? — including the sharp cliff at exactly 20% down.
• Is refinancing worth it? — if a refinance is your route out of FHA mortgage insurance.

See our methodology page for how every figure on this site is sourced.

This article is general education about private mortgage insurance, not financial, legal, or tax advice. Dollar figures were computed with CalculatorByState's own calculation engine using a 0.75% annual PMI rate and the Freddie Mac PMMS 30-year rate for the week of August 20, 2026. Your PMI rate, cancellation procedures, and loan terms are set by your lender and servicer — confirm the specifics of your own loan directly with them.