What is PMI, and how do I get rid of it?

Short answer: it's the price of a low down payment, and it ends

Private mortgage insurance (PMI (private mortgage insurance — an extra monthly fee on conventional loans when you put down less than 20%; it protects the lender, not you, and can usually be removed later)) is a monthly fee charged on a conventional loan when you put down less than 20%. It exists because a smaller down payment means the lender has less cushion if the loan goes bad, so an insurer covers part of that risk — and you pay the premium.

Two things people get wrong about it:

It doesn't protect you. If you stop paying, PMI pays the lender. You still lose the house. It buys you nothing except the ability to buy sooner with less cash.

It isn't permanent. On a conventional loan, federal law requires the servicer to cancel PMI automatically once your balance reaches 78% of the home's original value, and you can request cancellation at 80%. Most buyers who put 5% down are out of PMI within four to seven years — faster in an appreciating market.

That second point is why paying PMI is usually a better financial decision than spending five extra years saving to avoid it.

What it actually costs

PMI is priced as an annual percentage of your loan amount, billed monthly. The range in 2026 runs roughly 0.2% to 1.5% per year, and where you land depends on three things:

1. Your credit score. This is the biggest driver. A 760-score borrower can pay a third of what a 620-score borrower pays on the identical loan. 2. Your loan-to-value ratio. 3% down costs more than 15% down. 3. Your loan type and occupancy. Fixed-rate primary residences price best.

Real numbers on a $340,000 loan (roughly 5% down on a $358,000 home):

• 760 credit score: about 0.30% → roughly $85/month
• 700 credit score: about 0.55% → roughly $156/month
• 660 credit score: about 0.90% → roughly $255/month
• 620 credit score: about 1.30% → roughly $368/month

That spread is the strongest argument for improving your credit score before applying. Sixty points can be worth $200 a month for years — see the [credit score improvement guide](/guides/improve-mortgage-credit-score).

PMI is also tiered by score band, so being one point below a threshold costs real money. Ask your loan officer where the next break is; it's often 20 points away.

PMI vs FHA mortgage insurance — not the same thing

These get used interchangeably and they behave completely differently. The difference is worth thousands of dollars.

Conventional PMI - Applies when you put less than 20% down - Priced by credit score and loan-to-value - Cancellable. Request it at 80%, automatic at 78% - No upfront charge on most loans

FHA (Federal Housing Administration loan — a government-backed loan built for buyers with lower credit scores or smaller down payments) MIP (mortgage insurance premium) - Applies to every FHA loan regardless of down payment - Upfront premium of 1.75% of the loan, financed into the balance - Plus an annual premium collected monthly - On loans with less than 10% down, the annual premium lasts the life of the loan. With 10% or more down, it falls off after 11 years - Priced the same regardless of your credit score

The practical consequence: a strong-credit borrower is usually better off on conventional even with a slightly higher rate, because the mortgage insurance disappears. A borrower with a 620 score and high debt is often better off on FHA, because approval matters more than the insurance term — and refinancing to conventional later is the planned exit.

Our [FHA vs conventional comparison](/compare/fha-vs-conventional) runs both scenarios side by side.

The four ways to get rid of PMI

1. Automatic termination (free, requires patience). Under the Homeowners Protection Act, your servicer must terminate PMI automatically on the date your balance is scheduled to reach 78% of the original value, provided you're current on payments. You do nothing. This is the default path and it's based on the original amortization schedule, not on what the home is worth today.

2. Borrower-requested cancellation at 80% (free, requires a letter). You can request cancellation once the balance reaches 80% of the original value. Requirements: the request in writing, a good payment history, no second lien, and possibly an appraisal to confirm value hasn't dropped. Getting there early through extra principal payments works — the balance is what matters, not the calendar.

3. Cancellation based on a new appraisal (costs $500–$700, fastest). If your home has appreciated, you may reach 80% loan-to-value based on current value long before the amortization schedule says so. Most servicers allow this after a seasoning period — commonly two years, sometimes five with substantial improvements. Call your servicer, ask for their specific policy in writing, and order the appraisal they specify. In a market that ran up 20%, this can remove PMI three to four years early and pays for itself in a few months.

4. Refinance (costs 2–4% of the loan, but sometimes the only option). A new loan at 80% loan-to-value or better has no PMI. This is the only way off FHA mortgage insurance on a low-down-payment loan. It makes sense when rates are equal or lower than yours; it rarely makes sense purely to escape PMI if your current rate is meaningfully better than today's.

The removal request, step by step

Step 1 — Figure out where you stand. Take your current principal balance and divide by the original purchase price (for automatic and requested cancellation) or by a realistic current value (for the appraisal route). Under 0.80 means you're eligible.

Step 2 — Call your servicer and ask for their PMI cancellation requirements in writing. Every servicer has a written policy. Ask specifically about: seasoning requirements, whether they accept a broker price opinion or require a full appraisal, who orders it, and where the request must be sent.

Step 3 — Confirm your payment history qualifies. Generally: no payment 30+ days late in the last 12 months, and none 60+ days late in the last 24.

Step 4 — Submit the written request. Include your loan number, the property address, your current balance, and the basis for the request. Send it to the address they specify, not general correspondence.

Step 5 — Pay for the valuation if required and follow up in writing every two weeks. Servicers are slow on these and the clock does not run itself.

Step 6 — Verify it came off. Check the next two statements. Billing errors on PMI removal are common, and any premium collected after the termination date must be refunded.

Alternatives worth knowing about

Lender-paid PMI (LPMI). The lender pays the premium and charges you a higher interest rate instead. Your monthly payment can be lower than with regular PMI, but the rate is permanent — it never cancels at 80%. This is a reasonable trade only if you're confident you'll sell or refinance within a few years, or if you'll be in the loan long enough that the arithmetic works out. Run both side by side; don't accept it as an obvious upgrade.

Single-premium PMI. You pay the entire premium upfront, in cash or financed. No monthly charge. Works when a seller credit can cover it, or when you're certain you'll stay long-term. It's usually non-refundable if you sell early.

Split-premium PMI. A smaller upfront payment reduces the monthly premium. A middle path, rarely dramatic.

Piggyback 80/10/10. A first mortgage at 80%, a second lien at 10%, and 10% down — no PMI because the first loan is at 80%. The second lien usually carries a higher, often variable rate. This structure comes back into fashion whenever PMI pricing rises. It adds complexity and a second payment; it's not free.

Just putting 20% down is the cleanest answer when you can do it *and* still keep three or more months of housing payments in reserve. If it would empty your savings, PMI is the cheaper risk. See [PMI vs. a larger down payment](/guides/pmi-vs-larger-down-payment).

Common mistakes

• Assuming it drops off by itself at 20%. Automatic termination is at 78%, not 80%. The 80% threshold requires you to ask. Waiting quietly can cost you six to eighteen months of premiums.
• Not tracking the milestone. Put the projected 80% date in your calendar the month you close. Your servicer will not remind you.
• Forgetting appreciation counts. Buyers routinely pay PMI for years on a home worth 25% more than they paid. Ask about the appraisal route at the two-year mark.
• Refinancing solely to escape PMI. If your rate is a point better than today's market, the refinance costs more than the premium.
• Choosing FHA at a high credit score without comparing. With a 740 score and modest debt, conventional PMI is often cheaper than FHA's permanent premium — and it ends.
• Taking LPMI without doing the math. A permanently higher rate for a temporary charge is frequently the worse deal over a full loan term.