Private mortgage insurance can add hundreds to your monthly payment, and it protects your lender rather than you. Here is what it costs and how to end it as early as possible.
What PMI is
Private mortgage insurance protects your lender if you stop paying. It does not protect you. If you default, PMI pays the lender — you still lose the house and take the credit damage.
Lenders require it on conventional loans when your down payment is under 20%, because a smaller deposit means less equity cushioning them against a fall in the home's value.
What it costs
Typically 0.3% to 1.5% of the loan amount per year, billed monthly alongside your mortgage payment. Where you land in that range depends mostly on your credit score and how small your down payment is.
A $300,000 loan with 10% down:
At the higher end that's $4,500 a year buying you nothing you'd choose to buy. Over five years before it drops off, $22,500.
How to get rid of it
It cancels automatically — eventually
Under the US Homeowners Protection Act, PMI on most conventional loans must be removed automatically once your balance reaches 78% of the original purchase price, based on the original amortization schedule. You don't have to ask.
You can request it earlier at 80%
At 80% of the original value you can request cancellation in writing. Lenders generally require you to be current on payments and may ask for an appraisal. This is worth doing — the gap between 80% and 78% can be a year or more of unnecessary premiums.
Rising home values can accelerate it
If your home has appreciated, your equity may already exceed 20% even though your balance hasn't fallen much. Lenders will usually consider a new appraisal, though they set their own rules and may require you to have held the loan for a minimum period. An appraisal costs a few hundred dollars — worth it if it removes a $300 monthly premium.
Extra principal payments speed everything up
Because cancellation is tied to your balance, overpaying gets you there sooner. This is one of the highest-return uses of spare cash early in a mortgage.
PMI is not a reason to delay buying indefinitely. Waiting years to reach 20% while rents rise and prices move can cost more than the premiums would have. But it is a real cost that belongs in your monthly budget from day one — not a footnote.
Ways to avoid it entirely
- Put 20% down. The simple answer, if you can do it without draining every reserve.
- Lender-paid PMI. The lender covers it in exchange for a higher interest rate. That rate lasts the whole loan, while PMI would have ended — run both before assuming it's cheaper.
- Piggyback loans. A second mortgage covering part of the deposit. Adds complexity and a second rate; less common than it was.
- VA loans. If you're eligible through military service, these require no mortgage insurance at all.
One thing to watch on FHA loans
FHA loans have their own mortgage insurance premium, and the rules differ importantly: with a down payment under 10%, FHA insurance generally lasts the entire life of the loan rather than dropping off at 78%. Removing it usually means refinancing into a conventional mortgage. Worth knowing before choosing FHA for the lower deposit.
PMI is not included in most affordability estimates — see what your real budget is.
Open the Mortgage Affordability CalculatorMore on buying a home
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