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

Short answer: PMI is private mortgage insurance on a conventional mortgage when your down payment is under 20%. It protects your lender, not you, if you default. It costs roughly 0.5% to 1% of the loan amount a year — about $150 to $300 a month on a $360,000 loan. You can ask for removal at 80% of the home's original value; the servicer must drop it automatically at 78%. On a $400,000 home bought with 10% down at 7.24% over 30 years, asking at 80% costs about $23,175 in PMI at a 0.75% rate, against $26,550 if you wait.

What PMI Is and Who Pays for It

Private mortgage insurance is a policy your lender arranges with a private company when you take a conventional loan with less than 20% down. The CFPB puts it plainly: mortgage insurance of any kind protects the lender, not the borrower. If you fall behind on payments, PMI does not protect you, and you can still lose the home through foreclosure — it repays the lender if a foreclosure sale does not cover the loan balance. You pay for it monthly. PMI applies to conventional loans only — FHA loans carry a different charge, the mortgage insurance premium (MIP).

How Much Does PMI Cost?

PMI usually runs about 0.5% to 1% of the original loan amount per year. The exact rate depends on your credit score and down payment: a strong score with 10% down pays near the bottom, while a lower score or a 3% down payment can push the rate above 1%. The premium is based on the original loan amount, so the monthly figure stays flat as your balance falls.

Loan amount	PMI at 0.5% a year	PMI at 0.75% a year	PMI at 1% a year
$200,000	$83.33 a month	$125.00 a month	$166.67 a month
$300,000	$125.00 a month	$187.50 a month	$250.00 a month
$360,000	$150.00 a month	$225.00 a month	$300.00 a month
$400,000	$166.67 a month	$250.00 a month	$333.33 a month
$500,000	$208.33 a month	$312.50 a month	$416.67 a month

On the $360,000 loan below, PMI at 0.75% adds $225 a month — $2,700 a year.

Worked Example: A $400,000 Home With 10% Down

Take a $400,000 home with 10% down ($40,000 cash) and a $360,000 loan at 7.24% fixed over 30 years. Monthly principal and interest is $2,453.39; with PMI at 0.75%, another $225 a month, the payment before tax and insurance is $2,678.39. Both dates come from the Homeowners Protection Act of 1998, which uses the home's original value — the lower of the purchase price and the appraised value at closing.

80% — the date you can ask. 80% of $400,000 is $320,000. On scheduled payments only, the balance falls to $319,977.39 in month 103 — 8 years and 7 months. From that month you can ask in writing for cancellation, and the servicer must grant it if you meet the conditions below.

78% — the date it must end on its own. 78% of $400,000 is $312,000. The balance reaches $311,794.40 in month 118 — 9 years and 10 months, when the servicer must terminate PMI automatically, with no request from you, as long as you are current on payments.

The gap is 15 months. At 0.75%, PMI through month 103 totals $23,175, while waiting for automatic termination at month 118 totals $26,550 — asking on time saves $3,375 ($4,500 at 1%, $2,250 at 0.5%). Extra principal moves both dates forward: $200 a month extra brings the balance to $320,000 in month 68 — 5 years and 8 months — about 35 months sooner.

The 4 Ways to Remove PMI

1. Ask for cancellation at 80% loan-to-value. Once your balance reaches 80% of the home's original value — $320,000 in the example — write to your servicer and ask for cancellation. The servicer must grant it if you are current, have a good payment history (no payment 30+ days late in the past 12 months, none 60+ days late in the 12 before that), have no junior liens such as a second mortgage or home equity line of credit, and can show the value has not fallen below the original value.

2. Wait for automatic termination at 78%. On the date the balance is first scheduled to reach 78% of the original value — month 118 in the example — the servicer must terminate PMI without any request from you. It costs $3,375 more than asking at 80%.

3. Get a new appraisal after the home's value rises. The 80% and 78% thresholds use the original value, but many servicers will also cancel PMI based on the home's current value if a new appraisal shows your loan-to-value at 80% or below. If the example home appraises at $440,000, 80% of that is $352,000, and the balance falls to $351,775.40 in month 27 — just 2 years and 3 months after closing. An appraisal typically costs $300 to $600. Check your servicer's seasoning rule first — many require the loan to be at least 2 years old — and check comparable sales before paying for one.

4. Refinance into a loan with no PMI. If your home is now worth enough that a new loan would be 80% or less of its value, refinancing into a conventional loan without PMI removes the premium entirely. It also resets your rate, so it only helps if the new rate is at or below 7.24% — and closing costs run to thousands of dollars, so weigh them against the PMI saved.

FHA MIP Is Different — and Harder to Remove

FHA loans do not have PMI. They have a mortgage insurance premium (MIP) paid to the Federal Housing Administration. Every FHA loan carries two charges: an upfront premium of 1.75% of the loan amount — $6,300 on a $360,000 loan, usually financed into the loan — and an annual premium paid monthly. For most 30-year FHA loans the annual premium is 0.55%, or $165 a month on $360,000, cut from 0.85% by the Department of Housing and Urban Development in Mortgagee Letter 2023-05 (effective March 20, 2023).

The real difference is duration. For FHA loans with case numbers assigned on or after June 3, 2013, annual MIP lasts for the life of the loan with less than 10% down, and drops off after 11 years with 10% or more down. It does not cancel at 20% equity. The only way out is to refinance into a conventional loan at 80% loan-to-value or less.

PMI vs MIP at a Glance

	PMI (conventional loan)	MIP (FHA loan)
Who it protects	The lender	The FHA
Upfront cost	Usually none	1.75% of the loan ($6,300 on $360,000)
Annual cost	About 0.5% to 1% of the loan	0.55% for most 30-year loans since March 2023
Monthly cost on $360,000	$150 to $300	$165
Removed at 20% equity?	Yes — request at 80% LTV, automatic at 78%	No — equity alone does not remove it
How it ends	Cancellation, automatic termination, appraisal, or refinance	After 11 years if 10% or more down; otherwise only by refinancing into a conventional loan
Rate depends on credit score?	Yes	No — same rate regardless of credit score

With good credit, PMI is usually cheaper than MIP — $150 a month at 0.5% against $165 for MIP on the same loan — and it can be cancelled. With a low credit score, PMI can cost more than MIP.

Five Mistakes That Keep You Paying PMI

1. Assuming it drops off automatically at 80%. It does not — the automatic trigger is 78%. At 80% you have to ask, in writing: waiting costs 15 extra months, $3,375 at 0.75%.

2. Paying for an appraisal too early. An appraisal costs $300 to $600 and is non-refundable. Ordering one before the loan is seasoned (many servicers require 2 years) wastes the fee.

3. Forgetting the good-payment-history condition. One payment 30+ days late in the year before your request can block cancellation at 80%.

4. Ignoring junior liens. A home equity line of credit or second mortgage blocks cancellation — the Act requires you to certify no junior liens exist.

5. Refinancing to escape PMI without doing the maths. Removing a $225 PMI charge while raising the rate half a point adds about $123 a month to principal and interest, plus thousands in closing costs.

When PMI Is Worth Paying — and When to Wait

PMI is worth paying when waiting to save 20% costs more than the insurance. Waiting to save the extra $40,000 means renting for longer: as an illustration, a year of renting at $1,800 a month costs $21,600, while a year of PMI at 0.75% costs $2,700. The maths flips only if rent is very cheap, prices are flat or falling, or you can reach 20% in a few months anyway.

Frequently Asked Questions

What is PMI?

Private mortgage insurance on a conventional loan with under 20% down. It protects the lender, not you, and usually costs 0.5% to 1% of the loan a year — $150 to $300 a month on a $360,000 loan. It can be removed once you have enough equity.

How much is PMI per month?

It depends on the loan size and your rate. At 0.75% a year, PMI is $125 a month on a $200,000 loan, $187.50 on $300,000, $225 on $360,000 and $312.50 on $500,000.

Does PMI go away automatically?

Yes, but only at 78% of the home's original value, on the scheduled date, and only if you are current. On a $400,000 home with a $360,000 loan at 7.24%, that is month 118 — 9 years and 10 months. You can ask earlier, at 80%, which is month 103.

How do I ask to remove PMI?

Write to your mortgage servicer once your balance reaches 80% of the home's original value. You must be current, have a good payment history, have no junior liens, and be able to show the value has not fallen below its original value.

Can I remove PMI with a new appraisal?

Often, yes. If a new appraisal shows your loan is 80% or less of the home's current value, many servicers will cancel PMI — in the example, a $440,000 appraisal gets you to 80% in month 27 instead of month 103. Expect to pay $300 to $600, and check the seasoning rule first.

Does PMI go away on an FHA loan?

FHA loans have MIP, not PMI. With less than 10% down, annual MIP lasts for the life of the loan and does not cancel at 20% equity. With 10% or more down, it drops off after 11 years. The usual way out is to refinance into a conventional loan at 20% equity.

Sources: Consumer Financial Protection Bureau — "What is mortgage insurance and how does it work?" and "When can I remove private mortgage insurance (PMI) from my loan?", both last reviewed August 28, 2026; Homeowners Protection Act of 1998 (12 U.S.C. Chapter 49) — cancellation at 80% of original value, automatic termination at 78%; U.S. Department of Housing and Urban Development, Mortgagee Letters 2023-05 (annual MIP 0.85% to 0.55%, effective March 20, 2023) and 2013-04 (11-year MIP with 10%+ down, life of loan otherwise). All figures were verified by independent amortisation calculation at 7.24% over 30 years on a $360,000 loan; appraisal costs are a typical range and the rent comparison is illustrative. This article explains the maths and is not financial advice — confirm your PMI terms with your servicer before you buy.

Related reading: How Much House Can I Afford? The 28/36 Rule, Worked Out · Are Mortgage Points Worth It? The Break-Even Test on a $400,000 Loan · How to Calculate Mortgage Refinance Savings