PMI explained: what it costs and how to remove it
Private mortgage insurance protects the lender when your down payment is under 20%. It adds a meaningful amount to the payment, but unlike FHA insurance it is designed to fall off — and you can often speed that up.
Last reviewed August 2026
What PMI is and why it exists
When you put less than 20% down on a conventional loan, the lender faces more risk if you default and the home sells for less than the balance. PMI is a policy that covers part of that gap. It protects the lender, not you, but it is what makes a low-down-payment conventional loan possible.
PMI typically costs 0.3% to 1.5% of the loan amount per year, billed monthly. The rate depends on your credit score and your loan-to-value ratio. On a $380,000 loan at 0.6%, that is about $190 a month.
Three ways to remove it
- Automatic termination: by federal law, the servicer must cancel PMI once your balance is scheduled to reach 78% of the home's original value, provided you are current on payments.
- Request cancellation: you can ask in writing once you reach 80% of the original value — sooner if you have made extra payments. The lender may require a current appraisal to confirm the home has not lost value.
- Refinance: if your home has appreciated enough that a new loan would be at or below 80% LTV, refinancing removes PMI immediately — worth it only if the new rate and closing costs make sense.
Terms in this guide
- Private mortgage insurance (PMI) — Insurance that protects the lender, not you, when a conventional loan's down payment is under 20%. It typically costs 0.3–1.5% of the loan per year and, by law, must be cancelled once the loan reaches 78% of the original value.
- Loan-to-value ratio (LTV) — The loan amount divided by the property's value, as a percent. An 80% LTV (20% down) is the threshold below which private mortgage insurance is generally not required on a conventional loan.
- Mortgage insurance premium (MIP) — The mortgage insurance charged on FHA loans: an upfront premium of 1.75% of the loan plus an annual premium collected monthly. On most FHA loans it lasts the life of the loan unless you refinance to a conventional mortgage.
- Down payment — The portion of the purchase price you pay in cash up front. A larger down payment lowers the loan amount, can eliminate mortgage insurance at 20%, and often earns a slightly better rate.
Frequently asked questions
Is PMI tax deductible?
The mortgage insurance premium deduction has lapsed and been reinstated several times. Do not count on it; treat PMI as a full cost when deciding how much to put down.
How soon can I get rid of PMI?
You can request cancellation once you reach 80% of the original purchase price, which extra principal payments can accelerate. It terminates automatically at 78%. If the home has appreciated, a refinance or a lender's value-based cancellation may get you there faster.
Does a bigger down payment always beat paying PMI?
Not always. If putting 20% down would drain your emergency fund, a smaller down payment with a few years of PMI can be the safer choice. Compare the PMI cost against what the extra cash buys you in security or investment returns.