What Is PMI and How Do You Get Rid of It?
October 21, 2026
Private mortgage insurance (PMI) is an insurance policy that protects the lender, not you, if you stop paying a conventional mortgage. Lenders generally require it when your down payment is less than 20% of the home's value, meaning a loan-to-value ratio (LTV) above 80%. PMI usually costs between about 0.3% and 1.5% of the loan amount per year, depending on credit score and down payment.
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PMI is quoted as an annual percentage of the loan and paid monthly. On a $285,000 loan (a 5% down payment on a $300,000 home), a 0.8% PMI rate is $2,280 a year, or $190 a month, added to the principal-and-interest payment.
A higher credit score and larger down payment lower the rate. The same loan with a 10% down payment may cost closer to 0.4% to 0.6%, which is why even small increases in the down payment can shrink the monthly bill noticeably.
The 80% and 78% Rules
For conventional loans in the US, the Homeowners Protection Act lets you request PMI cancellation once your balance reaches 80% of the home's original value, provided you are current on payments and have no second liens. The servicer must cancel automatically when the scheduled balance reaches 78% of the original value.
You can reach those thresholds faster by making extra principal payments, or by asking for a new appraisal if the home has appreciated. Servicers set their own rules for appraisal-based removal, such as a minimum seasoning period of two to five years.
- 80% LTV: you may request cancellation in writing.
- 78% LTV: the servicer must end PMI automatically on the scheduled amortization.
- Midpoint of the loan term: PMI must end even if the 78% date has not been reached.
Alternatives to Paying PMI
Some lenders offer lender-paid PMI, where the cost is built into a slightly higher interest rate. That avoids a separate monthly line item but cannot be cancelled later, so it usually only makes sense if you plan to sell or refinance within a few years.
FHA loans use a different system, called mortgage insurance premium (MIP), which in many cases lasts for the life of the loan when the down payment is under 10%. Compare total cost, not just the monthly payment, across loan types.
Frequently Asked Questions
How much is PMI per month?
It depends on loan size, credit score, and down payment. A common range is 0.3% to 1.5% of the loan per year, so a $285,000 loan at 0.8% costs about $190 per month.
Does PMI ever go away on its own?
On conventional loans, yes. It must be terminated automatically when your scheduled balance reaches 78% of the home's original value, or at the midpoint of the loan term.
Is PMI tax deductible?
The deduction for mortgage insurance premiums has expired and been renewed in different years, so check the current tax rules or ask a tax professional before assuming it applies.
Is it better to put 20% down or pay PMI?
A 20% down payment avoids PMI, but it ties up cash. If paying PMI lets you keep a healthy emergency fund or invest the difference, it can be reasonable, as long as you plan to remove it as soon as you reach 80% LTV.