Financial decision
Mortgage insurance is the fee you pay to buy sooner. The only question is whether buying sooner is worth it.
Private mortgage insurance protects the lender, not you — which is why it feels like wasted money. But it is also the mechanism that lets a household buy years earlier than it otherwise could. Treated as a rental fee on time rather than a penalty, the decision becomes arithmetic instead of emotion.
At a glance
A monthly or single premium charged when your conventional loan-to-value exceeds 80%. Priced by credit score, loan-to-value, and coverage level, and cancellable under federal law.
Enough cash at closing to stay at or below 80% loan-to-value, removing the premium entirely from day one.
| Factor | Paying PMI | A Larger Down Payment |
|---|---|---|
| Upfront cash | Lower | Higher |
| Monthly cost | Higher while insurance is in force | Lower permanently |
| How long the cost lasts | Until 80% loan-to-value | Never applies |
| Cash reserves after closing | Preserved | Often depleted |
| Sensitive to credit score | Yes — heavily | No |
| Reversible | Yes — cancel later | No — cash is in the house |
Ask what the premium costs per month, then ask how many months of it you could buy with the down payment you would have spent.
Plain English first, then the rule as it is published, then what it means for your file.
“A borrower may request cancellation of private mortgage insurance when the principal balance reaches 80 percent of the original value, provided the borrower is current and has a good payment history.”
Put the request in writing to your servicer. They may require an appraisal at your expense and evidence of no subordinate liens, but they cannot simply decline a qualifying request.
“For mortgages with an LTV greater than 90 percent, the annual mortgage insurance premium is collected for the mortgage term; for LTV of 90 percent or less, it is collected for 11 years.”
The cancellation math in this article applies to conventional loans. On a typical 3.5%-down FHA loan the premium is permanent, and the standard exit is a refinance into a conventional loan once you hold enough equity.
Waiting would cost you more in rent and appreciation than the premiums will total, or depleting savings would leave you without an emergency reserve.
You have the cash today without emptying reserves, your credit score puts you in an expensive insurance tier, or you plan to hold the loan long enough that the savings compound.
Mortgage insurance is not a penalty — it is the price of entry, and on a conventional loan it has a defined end date. Price it, time it, and decide with the numbers in front of you.
Yes. Single-premium and lender-paid options exist. They can be cheaper if you hold the loan long enough, but they are not refundable if you sell or refinance early.
Yes for conventional loans, because cancellation is tied to the balance relative to the original value. Ask your servicer for their written policy first.
No. It reimburses the lender. Its only benefit to you is that it makes low-down-payment lending possible.
Every rule stated on this page is traceable to the agency handbook that governs it. Guidelines change — confirm anything time-sensitive with a licensed loan officer before acting on it.
Reviewed by Brian Mix, licensed loan officer (NMLS #111175) · Last checked July 2026.
Ask RED. It can walk through your specific numbers, explain any term on this page, and point you to the guide that goes deeper — no credit pull, no sales pressure.
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