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Key takeaways
- PMI is usually required on a conventional loan when your down payment is under 20%.
- You can request removal when your balance reaches 80% of the original home value; it ends automatically at 78% if you are current on payments.
- On a $400,000 home with 5% down at 6.5%, PMI at 0.6% costs $190 a month and reaches the 80% mark around payment 124 on the normal schedule.
- FHA mortgage insurance follows different rules and can last the life of the loan.
What PMI is
If you borrow more than 80% of a home’s value on a conventional loan, the lender usually requires insurance that pays them if you default. You pay the premium, typically as a monthly amount added to your payment. It is quoted as a yearly percentage of the loan amount. Published ranges are wide, commonly from a few tenths of a percent to over one percent a year, because the price depends on your credit score, down payment and loan type. Ask a lender for a quote rather than relying on any default.
The rules for ending it
Under the federal Homeowners Protection Act, for most conventional loans on a primary home:
- You can ask to cancel when your balance is scheduled to reach 80% of the home’s original value, or when you reach it early with extra payments. You generally need a good payment history, no second loans against the home, and a servicer may require evidence that the value has not fallen.
- It must end automatically when the balance is scheduled to reach 78% of the original value, if you are current on payments.
- Final termination happens at the midpoint of the loan term (for example after 15 years on a 30-year loan) if you are current, even if the balance is still above 78%.
Some loans, such as certain high-risk or lender-paid PMI arrangements, follow different rules, so check your loan documents.
Worked example
A $400,000 home with 5% down ($20,000) leaves a $380,000 loan. At 6.5% for 30 years, principal and interest is $2,401.86. PMI at 0.6% of the loan is $2,280 a year, or $190 a month.
- 80% of $400,000 is $320,000. On the normal schedule the balance first falls to that level at payment 124, about 10 years and 4 months in. You would pay roughly $23,560 in PMI by then.
- 78% of $400,000 is $312,000, reached at payment 135, about 11 years and 3 months in, when automatic termination applies.
Extra principal payments move these dates earlier. A larger down payment can avoid PMI altogether; compare the total cost with the full payment breakdown.
Ways to get rid of PMI sooner
- Pay extra principal so you reach 80% earlier.
- Ask your servicer about a new appraisal if the home has gained value. Rules and fees vary by servicer and investor.
- Refinance into a loan without PMI if the numbers still work after closing costs; see the refinance calculator.
PMI vs FHA, VA and USDA insurance
FHA loans charge an upfront premium of 1.75% plus an annual premium. With less than 10% down the annual premium lasts for the life of the loan; with 10% or more it lasts 11 years. VA loans have no monthly mortgage insurance but charge a funding fee. USDA loans charge an upfront guarantee fee and an annual fee. Use the FHA, VA and USDA calculators to compare.
Rules and limits change and servicers apply their own procedures. Confirm with your lender or servicer. This is general information, not legal or financial advice.