Private mortgage insurance (PMI) is a cost many homebuyers accept in exchange for buying with less than 20% down. It can make homeownership possible sooner, but it also adds to your monthly payment without building any equity for you. The good news is that, for most conventional loans, PMI does not last forever, and federal law sets clear points at which it must or can end.
This guide explains what PMI is, what affects how much you pay, the rules for canceling it, and the practical steps that can help you remove it sooner. It also covers how mortgage insurance on FHA loans differs, since those rules are not the same.
What PMI Is and Who It Protects
PMI is insurance that protects the lender, not the borrower, if the borrower stops making payments. The Maryland Insurance Administration describes it as a way to transfer risk from lenders to insurers until the homeowner has more than 20% equity in the property. You pay the premium, but the policy benefits the lender.
PMI typically applies to conventional loans. Freddie Mac’s homebuyer site states that if you put less than 20% down, you will have to pay PMI. The CFPB’s Loan Estimate explainer likewise notes mortgage insurance is typically required when the down payment is under 20% of the home price. Some lenders may also require it in other situations, such as when a borrower’s credit profile carries more risk.
Government-backed loans work differently. FHA loans carry their own mortgage insurance premium (MIP), and VA loans have their own rules. Our article on what an FHA loan is covers that program in more detail.
How Much PMI Costs and What Affects It
There is no single PMI price. The premium is set by the mortgage insurer and depends on the specifics of your loan. Freddie Mac offers a PMI calculator on its homebuyer site and advises contacting your lender for a precise figure. In general, factors that can affect the cost include:
- Your down payment and resulting loan-to-value ratio (LTV).
- Your credit profile.
- The loan type and term. The Maryland Insurance Administration notes PMI premiums on fixed-rate mortgages are often lower than on adjustable-rate loans.
- How the premium is paid, such as monthly with your mortgage payment or through other arrangements your lender offers.
To see what you would actually pay, check your Loan Estimate. Mortgage insurance appears in the Projected Payments table on page 1, and some premiums may also appear in closing costs on page 2. Our guide on how to read a Loan Estimate shows where to look.
The Federal Rules for Removing PMI
The CFPB explains the federal rules that apply to PMI on single-family principal residence mortgages that closed on or after July 29, 1999. There are three key milestones.
1. Request cancellation at 80%
You can ask your servicer in writing to cancel PMI once your principal balance reaches, or is scheduled to reach, 80% of the home’s original value. If you have made extra payments, you can ask sooner. The servicer must cancel if you:
- Make the request in writing.
- Have a good payment history and are current on payments.
- Certify there are no junior liens, such as a second mortgage or home equity line.
- Show, if required, that the home’s value has not dropped below its original value, often through an appraisal.
2. Automatic termination at 78%
Your servicer must end PMI automatically on the date your principal balance is scheduled to reach 78% of the original value, as long as you are current. If you are behind, PMI ends shortly after you catch up.
3. Final termination at the midpoint
Even if you have not reached 78%, PMI must end the month after you reach the midpoint of the loan’s amortization schedule, for example after 15 years on a 30-year loan, provided you are current.
What “original value” means: According to the CFPB, it is generally the lower of the contract sales price or the appraised value when you bought the home. If you refinanced, it is the appraised value at the time of the refinance. Your PMI disclosure form from closing shows the first date you can request cancellation.
Removing PMI Based on Your Home’s Current Value
The federal rules above are based on your original value and payment schedule. Investors that buy mortgages, such as Fannie Mae and Freddie Mac, may allow cancellation under their own guidelines, which the CFPB notes cannot be less favorable to borrowers than federal law.
For example, Fannie Mae’s Servicing Guide (section B-8.1-04) has allowed borrowers on a one-unit principal residence to request termination based on the home’s current value when the LTV is 75% or less on a loan seasoned two to five years, or 80% or less on a loan seasoned more than five years. It also requires an acceptable payment record, such as no payments 30 or more days late in the past 12 months and none 60 or more days late in the past 24 months. Fannie Mae published updates to its mortgage insurance termination requirements in 2026, so ask your servicer which rules currently apply to your loan, whether a new appraisal is required, and who pays for it.
Rising home values or improvements may help you reach these thresholds sooner. Our guide on how to build home equity faster covers ways to grow your equity.
A Hypothetical Timeline Example
The figures below are hypothetical, rounded, and based on simple assumptions. They are not a quote or a typical premium.
Suppose a buyer purchases a $350,000 home with 10% down, borrowing $315,000 on a 30-year fixed loan at 6.5%. The principal and interest payment is about $1,991 per month. Assume, for illustration only, that the lender quotes PMI of $131 per month.
- 80% of original value is $280,000. Making only scheduled payments, the balance would reach that point after about 95 payments, or roughly 7 years and 11 months. At that point, the borrower could request cancellation in writing.
- 78% of original value is $273,000. On schedule, the balance would reach that after about 109 payments, or roughly 9 years, when PMI must end automatically if the borrower is current.
Requesting cancellation at 80% instead of waiting for 78% would save about 14 months of premiums, or roughly $1,830 at the assumed rate. Extra principal payments would shorten both timelines.
How FHA Mortgage Insurance Differs
FHA loans use mortgage insurance premiums set by HUD, and the PMI cancellation rules above do not apply to them. Under HUD Mortgagee Letter 2023-05, for FHA case numbers endorsed on or after March 20, 2023, the upfront premium is 1.75% of the base loan amount. For 30-year loans with a base loan amount of $726,200 or less, the annual premium is 0.50% if the LTV is 90% or less (charged for 11 years) or 0.50% to 0.55% for higher LTVs (charged for the full term). Premiums for other loan amounts and terms differ. Check current HUD guidance and your servicer, since FHA rules can change.
Practical Steps to Get Rid of PMI Sooner
- Find your PMI disclosure. It shows your scheduled 80% and 78% dates.
- Make extra principal payments if your budget allows, and confirm they are applied to principal.
- Track your balance against 80% of your original value.
- Stay current. A clean payment history is required for borrower-requested cancellation.
- Avoid adding a second lien before requesting cancellation, since you must certify there are none.
- Ask about current-value options if your home has appreciated or you have made improvements.
- Put your request in writing and keep copies.
Frequently Asked Questions
Does PMI fall off automatically?
Yes, for covered loans. The CFPB says your servicer must end PMI when your balance is scheduled to reach 78% of the original value, if you are current, or at the loan’s midpoint at the latest.
Can I cancel PMI before reaching 80%?
Not under the federal request rule, but some investors allow cancellation based on current value at certain LTVs and seasoning periods. Ask your servicer.
Will refinancing remove PMI?
It can, if the new loan amount is low enough relative to the home’s value that the new lender does not require mortgage insurance. Weigh this against refinancing costs and the new interest rate.
Is lender-paid mortgage insurance removed the same way?
No. The CFPB notes that different rules apply when the lender pays the mortgage insurance, so check your loan terms.
Bottom Line
Private mortgage insurance lets you buy with less than 20% down, but it protects the lender and adds to your cost. For most conventional loans on a primary home, you can request cancellation at 80% of the original value, and it must end automatically at 78% or at the loan’s midpoint if you are current. Know your dates, keep a clean payment record, and ask your servicer about current-value options to stop paying PMI as soon as you qualify.
Sources
- Consumer Financial Protection Bureau – When can I remove private mortgage insurance (PMI) from my loan?
- Fannie Mae – Servicing Guide B-8.1-04, Termination of Conventional Mortgage Insurance
- Freddie Mac – Private Mortgage Insurance (PMI) Calculator
- Maryland Insurance Administration – Private Mortgage Insurance
- HUD – Mortgagee Letter 2023-05, Reduction of FHA Annual MIP Rates
- Consumer Financial Protection Bureau – Loan Estimate Explainer
This article is for general information only and is not financial advice. See our Disclaimer.
