Guide
Private Mortgage Insurance (PMI): Cost, Rules and Removal
PMI lets you buy with less than 20% down. Federal law also says when it has to stop.
What changed
- : First published.
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What PMI is
Private mortgage insurance is insurance a conventional lender requires when your down payment is less than 20% of the price. The CFPB is direct about who it protects: mortgage insurance, of any kind, protects the lender, not you, if you fall behind on payments. What it does for you is make a low down payment loan possible.
PMI is usually paid monthly as part of your mortgage payment, with little or nothing due at closing. Some loans instead have a single upfront premium, or lender-paid mortgage insurance, where the lender pays the premium and charges you a higher interest rate. The CFPB notes that if your lender pays the mortgage insurance, different removal rules apply.
What drives the price
PMI is priced by private insurers, not set by law, so no formula gives your exact cost. The CFPB says PMI rates vary by down payment amount and credit score, and that for borrowers with good credit, PMI is generally cheaper than FHA mortgage insurance. The main factors:
- Loan-to-value ratio (LTV). The loan divided by the home's value. A 5% down payment means 95% LTV and a higher premium than 15% down (85% LTV).
- Credit score. Higher scores get lower premiums.
- Loan features. Term, property type and whether it is your primary residence all matter.
Your Loan Estimate shows the monthly mortgage insurance amount. Enter it, as a yearly percentage of the loan, in our payment calculator.
When PMI ends: the federal rules
The Homeowners Protection Act sets removal rules for PMI on single-family primary residences with loans that closed on or after July 29, 1999. The CFPB summarizes them this way:
| Rule | When | What you need to do |
|---|---|---|
| Cancellation on request | When the balance is scheduled to reach 80% of original value, or earlier through extra payments | Ask in writing; have a good payment history and no junior liens; you may need to show the value has not declined |
| Automatic termination | When the balance is scheduled to reach 78% of original value | Be current on payments |
| Final termination | At the midpoint of the loan's amortization schedule (15 years into a 30-year loan) | Be current on payments |
"Original value" generally means the lower of the contract price or the appraised value when you bought. If you refinanced, it is the appraised value at the refinance.
The first date you can request cancellation should appear on the PMI disclosure you received at closing. If you can't find it, your servicer can tell you.
Example: when 78% arrives
A $400,000 home bought with 5% down has a $380,000 loan. At 6.5% for 30 years, the scheduled balance reaches $312,000 (78% of $400,000) at payment 135, about 11 years and 3 months in. At 80% ($320,000), the request date comes earlier, at payment 124. Paying $200 a month extra moves both dates years earlier. You can check your own dates with the amortization schedule.
Ways to shorten PMI
- Extra principal payments. The CFPB confirms you can ask to cancel early if extra payments bring the balance to 80% of original value.
- A bigger down payment. At 20% down, conventional loans usually need no PMI at all.
- Refinancing after values rise can remove PMI if the new loan is at 80% LTV or less, but a refinance has its own costs. The refinance calculator helps compare.
PMI versus FHA and VA
FHA loans charge mortgage insurance premiums (MIP) to the FHA: an upfront 1.75% and an annual premium. For most FHA loans with less than 10% down, the annual premium lasts for the life of the loan, so the 78% rule does not apply. VA loans have no monthly mortgage insurance but charge a one-time funding fee unless you are exempt. See FHA vs conventional loans and the VA funding fee guide.
This guide explains general rules for education. Your servicer and loan documents control your loan.
Common questions
Can I avoid PMI with less than 20% down?
Some lenders offer lender-paid mortgage insurance, built into a higher rate, and some buyers use a second loan for part of the down payment. Both have costs of their own. VA loans have no monthly mortgage insurance.
Does PMI come off if my home's value rises?
The federal 80% and 78% rules use the original value, generally the lower of the purchase price or the appraisal. Some servicers will consider a new appraisal under their own standards; ask yours.
Is PMI tax deductible?
Tax treatment of mortgage insurance premiums has changed over the years. Check current IRS guidance in Publication 936 or ask a tax professional.
Sources
- CFPB, What is private mortgage insurance?
- CFPB, What is mortgage insurance and how does it work?
- CFPB, When can I remove private mortgage insurance (PMI) from my loan?
- CFPB, What is a loan-to-value ratio and how does it relate to my costs?
Checked Nov 11, 2026. Spot an error? Tell us.