PMI Explained: What It Costs, When It Ends, and How to Get Rid of It
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Private mortgage insurance in plain English: why lenders require it, how it differs from FHA insurance, and the federal rules for canceling it.
If you put less than 20% down on a conventional mortgage, your lender will almost certainly require private mortgage insurance, or PMI. For many buyers it's the price of buying years sooner, and it's not permanent. Federal law gives you the right to cancel it once you've built enough equity, and it ends automatically after that.
This guide explains what PMI is, how it compares with FHA mortgage insurance, what affects its price, and the steps to remove it as early as possible.
What PMI is (and who it protects)
PMI is insurance that protects the lender, not you, if you stop making payments. You pay for it, usually as a monthly charge added to your mortgage payment. The CFPB's explainer notes that PMI can also be paid as an upfront lump sum at closing, or as a mix of upfront and monthly payments, depending on the lender's options.
Lenders require it because a loan with little equity behind it is riskier. If the home's value dips and the borrower defaults, the lender could lose money. PMI covers part of that loss, which is what makes 3%–5% down conventional loans possible.
What affects how much PMI costs
PMI pricing varies by insurer and lender, so there's no single rate to quote. The main factors are:
- Loan-to-value ratio (LTV): The less you put down, the higher the premium.
- Credit score: Higher scores generally get lower PMI premiums, often by a meaningful amount.
- Loan type and term: Fixed vs. adjustable, 15-year vs. 30-year.
- Coverage level required by the loan program.
Your Loan Estimate shows the expected monthly mortgage insurance amount on page 1 under Projected Payments. Ask each lender you're comparing to quote PMI too, since it can differ between them.
PMI vs. FHA mortgage insurance
FHA loans have their own insurance, called the mortgage insurance premium (MIP), and it works differently from PMI:
| Conventional PMI | FHA MIP | |
|---|---|---|
| Upfront charge | Usually none (unless you choose single-premium) | Upfront premium, typically financed into the loan |
| Monthly charge | Yes, until removed | Yes |
| How it ends | Can be canceled at 80% LTV; ends automatically at 78% | For most loans with under 10% down, lasts for the life of the loan; with 10%+ down, 11 years |
| Removing it early | Request cancellation or reach equity milestones | Typically requires refinancing out of FHA |
That difference matters. A buyer with a solid credit score might pay less over time with a 5% down conventional loan whose PMI can be removed than with a 3.5% down FHA loan whose insurance stays for the life of the loan. Our guide to first-time buyer programs compares the loan types in more detail.
Your federal rights to cancel PMI
The Homeowners Protection Act sets cancellation rules for most conventional loans on primary residences. The CFPB summarizes them:
- You can request cancellation once your principal balance is scheduled to reach, or you've paid it down to, 80% of the home's original value. You generally need a good payment history, and the lender may require proof that the value hasn't fallen and that there are no second liens.
- PMI ends automatically when your balance is scheduled to reach 78% of the original value, as long as you're current on payments.
- Final termination: PMI must end by the midpoint of the loan's amortization schedule (year 15 on a 30-year loan) if you're current, even if the other thresholds haven't been reached.
"Original value" usually means the lower of the purchase price or the appraised value at the time you bought.
Worked example: how long until PMI can go?
Say you buy at the national median price, $410,700 (Q2 2026), with 5% down, so your loan is $390,165. To request cancellation, your balance needs to reach 80% of the original value: $328,560. That means paying down about $61,605 of principal.
On a 30-year loan at 7.40%, normal payments alone take many years to cover that, since early payments are mostly interest. You can shorten the wait by:
- Making extra principal payments. Even $200 a month extra goes straight to principal. Our extra payments guide shows the effect.
- Making a lump-sum payment from a bonus or tax refund, then requesting cancellation.
- Using home value growth. Some lenders will cancel based on a new appraisal showing your balance is at or below a certain share of the current value. The rules for this are set by the loan's investor and the servicer, often with seasoning requirements, so ask your servicer what they require.
Should you avoid PMI by waiting for 20%?
Not necessarily. PMI is a cost, but so is renting and saving for several more years. Compare the total monthly payment, including PMI, against your budget and against how much longer you'd need to save. Our guide to how much down payment you really need runs the numbers.
Some buyers look at "piggyback" loans, such as a second mortgage for 10% of the price, to avoid PMI. These come with their own rates and risks and aren't automatically cheaper. Compare the total cost on paper.
Practical takeaways
- PMI protects the lender, but it's what makes low-down-payment conventional loans possible.
- Your credit score and down payment drive the price; get PMI quotes from every lender.
- Conventional PMI can be canceled at 80% LTV and ends automatically at 78%; FHA insurance often lasts the life of the loan.
- Extra principal payments and documented home value growth can end PMI sooner.
- Put a calendar reminder at your 80% date and contact your servicer in writing.
Estimate your full payment, including taxes, in the mortgage calculator, and check typical property taxes and closing costs on your state page.
When you are ready to shop, Compare FHA loan options with a lender (Affiliate link. We may earn a commission.).
Sources
- CFPB: What is private mortgage insurance?
- CFPB: When can I remove PMI from my loan?
- HUD: Loans (FHA)
- Freddie Mac Primary Mortgage Market Survey
Rates and prices are as of the dates noted and will change. This article is for education only and is not financial advice.
