What Is PMI on a Mortgage? (And How to Get Rid of It)

PMI (Private Mortgage Insurance) is required on conventional mortgages when you make a down payment of less than 20%. It protects the lender — not you — against loss if you default. On a $300,000 loan, PMI typically costs $125–$375/month (0.5–1.5% annually). The good news: PMI is not permanent. On conventional loans, it must automatically cancel once your loan balance reaches 78% of the original purchase price.

What is PMI on a mortgage

1. Understand why it exists — lenders consider loans with less than 20% down higher risk. PMI compensates the lender if you default and the home cannot be sold for the full loan balance.
2. Calculate your PMI cost — PMI rate × loan amount ÷ 12. At 0.75% on a $280,000 loan: ($280,000 × 0.0075) ÷ 12 = $175/month.
3. Know when it ends (conventional loans) — you can request cancellation when your loan balance reaches 80% of the original home value; lenders must automatically cancel at 78% LTV based on the amortisation schedule.
4. Understand FHA is different — FHA has MIP (Mortgage Insurance Premium), not PMI. For loans with less than 10% down originated after June 2013, FHA MIP is required for the life of the loan. The only way to remove it is to refinance to a conventional loan.

How PMI costs add up

PMI until 20% equity assumes 5% down at 7% rate on a 30-year loan — approximately 84 months until the balance reaches 80% LTV through normal amortisation. Appreciation and extra principal payments can shorten this significantly.

What determines your PMI rate

PMI premiums are not fixed. They vary based on:

• Loan-to-value (LTV) ratio: the closer to 80% LTV (larger down payment), the lower the PMI rate. 5% down carries more PMI risk than 15% down.
• Credit score: higher credit scores pay lower PMI premiums. A 760+ score might pay 0.3–0.5%; a 620 score might pay 1.5%+.
• Loan term: 15-year loans often have lower PMI rates than 30-year loans.
• Fixed vs adjustable rate: adjustable-rate mortgages typically carry higher PMI rates.
• Property type: single-family homes usually have lower PMI than condos or multi-family properties.

How to cancel PMI: the exact process

Under the federal Homeowners Protection Act (HPA), cancellation works as follows:

1. Track your balance: get a payoff statement or use an amortisation calculator to find when your balance reaches 80% of the original purchase price (not current appraised value).
2. Submit a written request: when you reach 80% LTV (or expect to by a payment date), send a written cancellation request to your servicer.
3. Meet the requirements: your loan must be current (no late payments in the last 12 months), your home must not have declined in value, and no junior liens can exist.
4. Get confirmation in writing: the servicer must acknowledge cancellation and confirm no future PMI charges.
5. Automatic cancellation: if you do not request it, PMI must automatically cancel when your balance reaches 78% of the original purchase price based on the original amortisation schedule (not based on accelerated payoff).

Using appreciation to cancel PMI early

If your home has appreciated significantly, you may be able to cancel PMI before the amortisation schedule reaches 80% LTV, using a new appraisal. Requirements:

• Your loan must be at least 2 years old for home value appreciation to be used.
• You must demonstrate the home's current value results in an LTV of 80% or lower.
• A formal appraisal (typically $400–$600) is required — not a Zillow estimate.
• No late payments in the last 12 months and the loan must be current.

In a rising market, this is the fastest path to PMI removal. If home values have risen 15%, a 10% down payment loan may now be at 75% LTV — well below the 80% threshold.

Authoritative sources

• Consumer Financial Protection Bureau — What Is Private Mortgage Insurance? — CFPB explanation of PMI requirements, how premiums are calculated, and the cancellation process under the Homeowners Protection Act.
• HUD — FHA Mortgage Insurance — Official HUD documentation on FHA MIP rates, upfront premium, and the differences from conventional PMI — including the lifetime MIP requirement for post-2013 FHA loans.

Key takeaways

• PMI is required on conventional mortgages with less than 20% down. It costs approximately 0.5–1.5% of the loan amount per year — $125–$375/month on a $300,000 loan.
• PMI is not permanent on conventional loans. You can request cancellation at 80% LTV; it must automatically cancel at 78% LTV based on the original amortisation schedule.
• FHA MIP is different — for loans with less than 10% down originated after June 2013, MIP is required for the life of the loan and cannot be cancelled. Refinancing to a conventional loan is the only removal path.
• Your PMI rate depends on credit score, LTV, loan term, and loan type. A 760+ score at 10% down might pay 0.3–0.5%; a 620 score might pay 1.0–1.5%+.
• Home appreciation allows early PMI cancellation: a lender-ordered appraisal (at your expense) can establish 80% LTV earlier if values have risen, as long as the loan is at least 2 years old and your payment history is clean.
• Understanding the total cost of PMI is part of evaluating whether to put 20% down. Your credit score also directly affects PMI premiums — improving to 760+ before applying reduces both your mortgage rate and your PMI cost.

Frequently asked questions

How much does PMI cost per month?

PMI typically costs 0.5–1.5% of the loan amount per year, paid monthly. On a $300,000 loan at 1%, that is $250/month. Exact costs depend on loan-to-value ratio, credit score, loan term, and insurer. A higher credit score and larger down payment reduce PMI premiums. PMI premiums are included in your monthly mortgage payment.

When does PMI go away?

Under the Homeowners Protection Act, PMI on conventional loans must automatically cancel when your loan balance reaches 78% of the original home value (based on your amortisation schedule). You can also request cancellation at 80% LTV. Lenders have up to 30 days to cancel after the request. PMI does not automatically cancel on FHA loans — you must refinance to a conventional loan once you have 20% equity.

Can I avoid PMI with less than 20% down?

Three strategies: (1) Lender-paid PMI (LPMI) — lender pays the PMI in exchange for a higher interest rate; saves monthly but costs more over time. (2) Piggyback loan (80-10-10) — first mortgage at 80%, second mortgage at 10%, and 10% down payment eliminates PMI but adds a second loan at a higher rate. (3) VA loans — no PMI for eligible veterans regardless of down payment.

Is PMI tax-deductible?

The PMI deduction has expired and been reinstated multiple times by Congress. As of 2026, check current tax law — the deduction is not permanently in the tax code. Even when available, it was limited to taxpayers with AGI below $109,000 and phased out above $100,000.

What is the difference between PMI and MIP?

PMI (Private Mortgage Insurance) is required on conventional loans with less than 20% down. MIP (Mortgage Insurance Premium) is the equivalent for FHA loans. The key difference: PMI can be cancelled when equity reaches 20%. FHA MIP is typically required for the life of the loan for mortgages originated after June 2013 with less than 10% down — the only way to eliminate it is to refinance to a conventional loan.