What Is PMI? Private Mortgage Insurance Explained
PMI protects your lender, not you, and you pay it on a conventional loan with less than 20% down. Here's what it costs at this week's rates, exactly when it comes off, and how to get rid of it sooner.
PMI (private mortgage insurance) is insurance your lender requires when you buy a home with a conventional loan and put down less than 20%. You pay the premium, usually as part of your monthly payment, but it protects the lender: if you stop paying and the home sells at a loss, the insurer covers part of that loss. That protection is what lets lenders approve conventional loans with as little as 3% down. PMI typically costs 0.46%–1.5% of the loan a year, and unlike FHA mortgage insurance it comes off once you have enough equity.
A worked example at this week's rates: a $350,000 home with 10% down is a $315,000 loan at 7.09% (Optimal Blue's conforming 30-year average, Nov 5, 2026). With a 700–759 credit score, PMI adds about $197 a month. You can ask to cancel it after 8 yr 6 mo, when the balance reaches 80% of the price, and it ends on its own after 9 yr 8 mo at 78% — about $20,081 of PMI if you ask on time, $22,838 if you wait.
See it on your own numbers with the mortgage calculator with PMI, which shows the month PMI drops off.
What PMI is — and isn’t
PMI pays your lender if you default. It does nothing for you directly — it simply makes a lender willing to approve a loan with less than 20% down. It’s easy to confuse with two other policies:
- Homeowners insurance protects you against damage to the home. PMI doesn’t.
- Mortgage protection (life or disability) insurance pays off the loan if you die or can’t work. PMI doesn’t do that either.
PMI belongs to conventional loans only. Government-backed loans have their own versions, with different rules:
| Loan type | Upfront charge | Annual charge | When it ends |
|---|---|---|---|
| Conventional (PMI) | None (unless you choose single-premium) | About 0.46%–1.5% | On request at 80% of original value; automatically at 78% |
| FHA (MIP) | 1.75% | 0.50%–0.55% | Life of the loan under 10% down; 11 years with 10% or more |
| USDA (guarantee fee) | 1% | 0.35% | Life of the loan |
| VA (funding fee) | 1.25%–3.30% (waived with a service-connected disability) | None | No monthly insurance |
You pay PMI whenever a conventional loan is more than 80% of the home’s value — a purchase with less than 20% down, or a refinance with less than 20% equity. How much it costs for different loan sizes is in how much PMI costs.
When does PMI go away?
The federal Homeowners Protection Act sets two dates for loans on a primary home closed since July 1999. You can ask to cancel PMI once your balance reaches 80% of the home’s original value — the lower of the purchase price and the appraisal at closing — and the servicer must end it automatically when the balance is scheduled to reach 78%. If neither happens first, it ends at the loan’s midpoint.
How long PMI stays on a $350,000 home bought this week (30-year fixed at 7.09%), by down payment and by route out:
| Down payment | Automatic (78%) | You ask (80%) | Ask + $200/mo extra | Ask with value +3.0%/yr |
|---|---|---|---|---|
| 3% ($10,500) | 12 yr 8 mo | 11 yr 9 mo | 7 yr 11 mo | 5 yr 1 mo |
| 5% ($17,500) | 11 yr 11 mo | 10 yr 11 mo | 7 yr 3 mo | 5 yr 1 mo |
| 10% ($35,000) | 9 yr 8 mo | 8 yr 6 mo | 5 yr 4 mo | 4 yr 6 mo |
| 15% ($52,500) | 6 yr 9 mo | 5 yr 1 mo | 3 yr | 3 yr 2 mo |
"Automatic" and "you ask" follow the loan's original schedule, measured against the original value (the lower of the price and the appraisal at purchase). Extra principal counts toward the 80% request as soon as the balance actually gets there. If neither happens first, PMI must end at the loan's midpoint — year 15 on a 30-year loan — as long as you're current.
The last column uses home values rising 3.0% a year, the latest national change in the FHFA house price index (year to Q2 2026), and Fannie Mae's current-value rule: after two years you need a balance of 75% or less of today's appraised value, after five years 80%. Your own market can move faster, slower or backwards; the mortgage calculator with PMI shows the exact month for your loan.
How to get rid of PMI
- Ask in writing at 80%. Don’t wait for the automatic date. Your servicer will check that you’re current, that no payment was 30 days late in the past 12 months or 60 days late in the past 24, that there’s no second mortgage on the home, and that its value hasn’t fallen below the original — sometimes with an automated valuation, sometimes with an appraisal you pay for.
- Pay extra principal. Extra monthly payments or a lump sum count as soon as the balance actually reaches 80%. The mortgage payoff calculator shows how much faster you get there.
- Use your home’s current value. If your home has gained value, you can ask for PMI to be removed based on a new appraisal or broker price opinion. Fannie Mae requires a balance of 75% or less of the current value when the loan is two years to five years old, and 80% or less after five years. Substantial improvements — a new kitchen or bath, added square footage — can waive the two-year wait, at 80%. Ordinary repairs don’t count.
- Refinance. A new loan at 80% of today’s value or less carries no PMI. It only pays if the closing costs are smaller than the premiums you’d stop paying, or if you also get a lower rate — run it through the refinance calculator.
- Let it fall off. At 78% of the original value, or at the midpoint of the term, the servicer has to cancel it without a request (Fannie Mae bars a fee for that). Any unearned premium has to be refunded within 45 days.
Lender-paid mortgage insurance is the exception: it’s built into your interest rate, so it can’t be cancelled — only refinanced away.
What PMI costs before it’s gone
What the same 10%-down loan ($315,000) pays in PMI before it comes off, by credit score. Asking at 80% instead of waiting for the automatic cut-off saves 14 months of premiums.
| Credit score | Typical PMI | Per month | Total if you ask (8 yr 6 mo) | Total if you wait (9 yr 8 mo) | Asking saves |
|---|---|---|---|---|---|
| 760+ | 0.46%–0.60% | $139 | $14,191 | $16,139 | $1,948 |
| 700–759 | 0.60%–0.90% | $197 | $20,081 | $22,838 | $2,756 |
| 680–699 | 0.90%–1.15% | $270 | $27,578 | $31,364 | $3,785 |
| 640–679 | 1.15%–1.40% | $336 | $34,272 | $38,976 | $4,704 |
| 620–639 | up to 1.5% | $394 | $40,163 | $45,675 | $5,513 |
Premiums are the midpoints of typical annual rates by score from our PMI cost reference, which also prices other loan sizes; real quotes depend on the insurer, your down payment and your debt-to-income ratio. Monthly PMI is usually charged on the original loan amount, so it doesn't shrink as you pay down the balance.
Types of PMI
- Borrower-paid monthly PMI — the common kind: a monthly premium added to your payment until it’s cancelled.
- Single-premium PMI — paid once at closing, by you or the seller. There’s no monthly charge, but the money is usually gone if you sell or refinance within a few years.
- Split-premium PMI — part upfront, part monthly; a smaller monthly charge for some cash at closing.
- Lender-paid PMI (LPMI) — the lender buys the policy and charges you a higher interest rate instead. No separate line item, but you pay it for as long as you keep the loan.
How to avoid PMI
- Put 20% down. No PMI, a smaller loan and less interest.
- Use a piggyback loan. An 80-10-10 piggyback splits the financing so the first mortgage stays at 80% — but the second loan usually carries a higher rate, so compare its interest with the PMI it replaces.
- Choose lender-paid PMI if you expect to sell or refinance before PMI would come off anyway.
- Use a VA loan if you’re eligible: it has no monthly mortgage insurance at all.
Is PMI worth it?
PMI is the price of buying before you have 20% saved. Here is that trade on a $350,000 home, using this week's 7.09% rate and the latest year of national home-price change:
| Buy now, 5% down | Save to 20% first | |
|---|---|---|
| Cash down | $17,500 | $70,000 |
| Monthly PMI (700–759 score) | $208 | $0 |
| PMI until you can cancel | $27,223 over 10 yr 11 mo | $0 |
| Still to save before buying | $0 | $52,500 |
| Price change per year of waiting (FHFA, +3.0%) | — | +$10,500 |
If saving the extra $52,500 would take years, PMI often costs less than the price growth you'd be chasing — but home prices can also stall or fall, as they did nationally from 2007 to 2011, and a bigger down payment also means a smaller loan and less interest. The down payment calculator shows how much each extra percent saves.
Is PMI tax deductible?
Yes, again, starting with tax year 2026. The One Big Beautiful Bill Act, signed in July 2025, permanently treats mortgage insurance premiums — PMI, FHA MIP, the VA funding fee and USDA guarantee fees — as deductible mortgage interest. Three limits apply: you have to itemize rather than take the standard deduction, the deduction shrinks once your adjusted gross income passes $100,000 and disappears above $109,000 (half those amounts if married filing separately), and premiums paid in 2022 through 2025 aren’t deductible. Check the current IRS instructions or a tax professional for your situation.
The bottom line
PMI is the price of buying with less than 20% down, and it’s temporary on a conventional loan — but it only goes away early if you act. Know your 80% date from the start, pay extra if you can, ask for a new valuation if your home gains value, and request cancellation in writing the month you qualify. Comparing PMI with FHA’s mortgage insurance? See FHA vs. conventional.
Frequently asked questions
What is PMI on a mortgage?
Private mortgage insurance is a monthly charge on a conventional loan when you put down less than 20%.
It pays the lender, not you, if you default and the home sells at a loss — the trade-off that lets lenders approve loans with as little as 3% down.
It typically costs 0.46%–1.5% of the loan a year and comes off once you build enough equity.
When does PMI go away?
You can ask your servicer to cancel it once the balance reaches 80% of the home's original value, and it must end automatically at 78% — or at the loan's midpoint, whichever comes first.
With 10% down on a 30-year loan at this week's 7.09% average, that's about 8 yr 6 mo if you ask and 9 yr 8 mo if you wait. Extra payments or a rise in your home's value can make it sooner.
Does PMI go away after 20 percent?
Yes — at 20% equity measured against the original value you can request cancellation, and at 22% it drops automatically.
Equity from a rise in your home's value counts only if you ask for a current-value review with a new appraisal: Fannie Mae requires a balance of 75% or less of today's value if the loan is two to five years old, or 80% after five years.
How do I get rid of PMI early?
Pay extra principal until the balance reaches 80% of the original value and ask in writing; or, after two years, order a new valuation if your home has gained value; or refinance into a loan at 80% of today's value or less.
You'll need a clean payment record: no payment 30 days late in the past year and none 60 days late in the past two.
Is PMI tax deductible?
Yes again, starting with tax year 2026. The One Big Beautiful Bill Act made mortgage insurance premiums — PMI, FHA MIP, the VA funding fee and USDA guarantee fees — deductible as mortgage interest for good.
You have to itemize, and the deduction shrinks once adjusted gross income passes $100,000 and disappears above $109,000 (half those amounts if married filing separately). It wasn't available for 2022 through 2025.
Is removing PMI a good idea?
Almost always. PMI only protects the lender, so once you qualify every month you keep paying it is money with nothing in return for you.
Automatic cancellation is free; a request may require a valuation you pay for, and a refinance has closing costs — compare those one-time costs with the monthly premium you'd stop paying.
Is high PMI good or bad?
A high premium mostly reflects a lower credit score or a small down payment — the insurer is pricing more risk.
It isn't a problem in itself if it lets you buy sooner, but it's worth shrinking: raising your score into a higher band or putting a little more down can cut the rate, and the sooner you reach 80% the sooner it ends.
How much is PMI on a $400,000 house?
With 10% down the loan is $360,000, so at the usual 0.46%–1.5% a year PMI runs about $138 to $450 a month; a 700–759 score near 0.75% pays about $225. See how much PMI costs for other loan sizes.
Do FHA loans have PMI?
No — FHA loans have their own mortgage insurance premium (MIP): 1.75% upfront plus an annual premium that lasts for the life of the loan with less than 10% down.
Unlike PMI it doesn't end at 20% equity; the usual way out is refinancing. See FHA vs. conventional for the cost difference.
Sources
- CFPB — What is private mortgage insurance? (Homeowners Protection Act cancellation rules)
- Fannie Mae Servicing Guide B-8.1-04 — Termination of conventional mortgage insurance
- One Big Beautiful Bill Act (Pub. L. 119-21) §70108 — mortgage insurance premiums as qualified residence interest, IRC §163(h)(3)(E)
- FHFA — House Price Index
- Optimal Blue Mortgage Market Indices on FRED (conforming 30-year)
How the figures on this site are calculated and tested: methodology · editorial policy.
This guide is general educational information, not financial advice. Confirm specifics with a licensed lender or advisor.