What Is PMI and How to Get Rid of It Early

Quick Answer

PMI (Private Mortgage Insurance) is a fee charged on conventional loans when your down payment is under 20%. It typically costs 0.5%–1.5% of the loan amount per year — $100–$300+ per month on an average loan — and it protects the lender, not you.

See exactly how a bigger down payment changes your payment in the Mortgage Calculator.

What PMI Actually Costs

On a $320,000 loan:

0.5% PMI = $133/month
1.0% PMI = $267/month
1.5% PMI = $400/month

Your rate depends on credit score, loan-to-value (LTV) and occupancy. A 760-score borrower with 10% down pays a fraction of what a 640-score borrower with 5% down pays — PMI pricing punishes risk twice.

When Does PMI Automatically End?

Under federal law (Homeowners Protection Act), for conventional loans:

Auto-termination: at 78% LTV — based on the original amortization schedule — PMI must end (you must be current on payments).
Requestable: you can request cancellation at 80% LTV, sooner than the automatic date if you’re prepaying principal.

The amortization-schedule path is slow: on a 30-year loan, scheduled 78% LTV often arrives around year 11–13. Paying early is how you cut the timeline dramatically.

4 Ways to Kill PMI Early

Target 80% LTV and request it in writing. Track your balance; once you cross 80%, send a cancellation request — the lender must verify (sometimes with an appraisal, ~$500) and remove it.
Prepay principal. One extra payment per year shaves years off PMI tenure. On a 5%-down purchase, aggressive prepayment can end PMI in 3–5 years instead of 12.
Use appreciation. If your home value jumped, a new appraisal showing 20–25% equity can justify removal — lender rules vary, ask first.
Refinance out of it. If rates have also dropped, a refinance at lower LTV kills two birds. Check the math in the Refinance Calculator.

PMI Alternatives (If You Haven’t Bought Yet)

Lender-paid PMI (LPMI): no monthly PMI, but a higher rate for the life of the loan — usually worse unless you’ll move early.
Piggyback 80-10-10: 10% down + second loan for 10% — second-lien rates have made this less attractive recently, but compare.
VA loans (eligible veterans): no PMI at any down payment — the strongest benefit available.

FAQ

Is PMI worth paying to buy sooner?

Often yes, rationally: waiting 4 years to save 20% down while prices rise 5%/year can cost more than the PMI. Run both scenarios with real local numbers before deciding.

Does PMI ever come back?

No — once cancelled on a conventional loan, it stays gone (as long as you keep paying). FHA’s version (MIP) is different: most FHA loans since 2013 keep it for the full loan term unless you refinance.

How do I know my current LTV?

Current balance ÷ original value. Compare it to your local market value — if appreciation pushed real equity past 20%, you may cancel sooner than the schedule suggests.

This article is for educational purposes only and is not mortgage advice. See our full disclaimer.