PMI: What It Costs and How to Remove It
Private mortgage insurance is a monthly charge that protects your lender — not you — and you pay it whenever your down payment is under 20%. It typically costs about 0.5% to 1% of the loan per year, it stacks on top of your regular payment, and the good news is it's not forever: here's what it costs and every legitimate way to get rid of it.
What PMI actually is
PMI (private mortgage insurance) protects the lender against losses if you default on a low-down-payment loan. It doesn't protect you, it doesn't build your equity, and it doesn't reduce what you owe — it's a risk premium the lender passes to you because a loan above 80% of the home's value is riskier for them.
On a conventional loan, PMI is typically required when you finance more than 80% of the home's value. VA loans skip it entirely (eligible service members pay a funding fee instead), and FHA loans use their own system — MIP — which works differently, as we'll see below.
What PMI costs: a real comparison
PMI is usually quoted as an annual rate on the loan balance — typically around 0.5% to 1% per year as a general range. Your actual rate depends on your credit score, down payment size, and lender: stronger credit and a bigger down payment get lower rates. Take the difference a small down payment makes on a $400,000 home at 6.5% for 30 years:
5% down ($20,000): $384,000 loan → principal & interest of $2,427.14/month — $404.52 more, before PMI.
PMI on top: at 0.5%–1% of the $384,000 loan per year, that's roughly $160–$320/month extra. So the 5%-down buyer pays about $565–$725 more per month than the 20%-down buyer on the same house.
Two costs are stacked here and they're easy to confuse: the bigger loan (more principal at the same rate) and the PMI premium itself. The PMI part is what you can eventually eliminate without refinancing. Our mortgage calculator has a PMI rate field — enter the rate your lender quotes and it applies it monthly (loan × rate ÷ 12) whenever the down payment is under 20%, so you can see the true all-in payment.
How long you're stuck with it
If you simply make the scheduled payments, PMI follows your amortization schedule down. Run that $384,000 loan at 6.5% for 30 years:
Your balance reaches $312,000 — 78% of the original value — around month 140 (about 11⅔ years). That's when the servicer must cancel it automatically, assuming payments are current.
So even the passive path has an end — but notice the gap: requesting cancellation at 80% beats the automatic trigger by roughly a year of PMI payments. And both of these assume the scheduled balance against the original value; appreciation can shorten the timeline dramatically, which brings us to the removal methods.
The five ways to get rid of PMI
- 1. Request cancellation at 80% LTV. Once your balance hits 80% of the home's original value (20% equity), you can ask. This is borrower-initiated — it won't happen on its own. You'll submit a written request, be current on payments, have no other liens on the property, and possibly pay for an appraisal confirming the value.
- 2. Wait for automatic termination at 78%. The Homeowners Protection Act of 1998 requires your servicer to cancel PMI once the scheduled balance reaches 78% of the original value. No action needed — but it's based on the original price, so appreciation doesn't speed it up.
- 3. Hit the halfway point. PMI must also be terminated automatically at the midpoint of your amortization schedule — year 15 on a 30-year loan — even if the balance is still above 78%. Payments must be current.
- 4. Get a new appraisal. If your home has appreciated, you may not need to wait for the balance to fall. Pay for an appraisal showing the current value puts your loan at 80% LTV or better, and request cancellation on that basis. Renovations that raised the value work the same way.
- 5. Refinance. If rates have dropped or your equity has grown past 20% on a current appraisal, a new conventional loan at 80% LTV or below comes with no PMI. Run the refinance math carefully — closing costs can eat the savings.
There's also an accelerator that works with any of these: extra principal payments. Every extra dollar goes straight to the balance, so you reach the 80% threshold sooner. On that $384,000 loan, even modest extras pull the request date forward — our mortgage calculator's amortization schedule shows the exact month your balance crosses 80% with and without extras.
How to actually request cancellation
When your balance is at or below 80% of the original value, the process is:
- Contact your mortgage servicer (who you pay each month — not necessarily the original lender) and ask for their PMI cancellation procedure in writing.
- Submit the written request they require.
- Be current on payments with a good payment history.
- Make sure there are no subordinate liens — a second mortgage or HELOC can disqualify you.
- Pay for an appraisal if the servicer requires one to confirm the value hasn't fallen.
Servicers sometimes drag their feet or misapply the rules. Know your rights: borrower-requested cancellation at 80% and automatic termination at 78% are federal law for most conventional loans, not a favor.
FHA loans play by different rules
If you have an FHA loan, your insurance is called MIP (mortgage insurance premium) — and it doesn't fall off the way PMI does. For most FHA loans originated after mid-2013 with less than 10% down, MIP stays for the life of the loan. It also includes an upfront premium of 1.75% of the loan amount, usually rolled into the balance.
The standard escape is refinancing into a conventional loan once you have at least 20% equity. For buyers with strong credit, a conventional loan with temporary PMI is often cheaper over the long run than an FHA loan with permanent MIP — one more reason to compare loan types before you buy, not after.
Is PMI tax deductible in 2026?
Starting with tax year 2026, PMI premiums were reinstated as deductible mortgage interest under the One Big Beautiful Bill Act — they had expired after 2021. Income limits apply, and the details depend on how you file. This doesn't make PMI free, but it can soften the cost if you itemize. Confirm your eligibility with a tax professional before counting on it.
See your own PMI number
Enter your price, down payment, rate, and the PMI rate your lender quotes into our mortgage calculator — it breaks out the PMI line separately and shows your all-in payment. Then use our affordability calculator to check whether the bigger down payment that avoids PMI changes the home price you can reach.
Assumptions and limits
All figures on this page are for 2026, using a fixed 6.5% 30-year rate and the standard amortization math. The 0.5%–1%-per-year PMI range is a general industry range — your actual PMI rate depends on your credit score, down payment, loan program, and lender, and only their quote is real. Removal timelines assume scheduled payments against the original home value; prepayments, appreciation, and servicer requirements change the dates. PMI rules cited are federal law for most conventional loans; FHA, VA, and USDA loans have their own insurance systems. These are estimates for planning, not financial advice.