What Is PMI and How Do You Get Rid of It?

Private mortgage insurance, or PMI, is one of the most misunderstood line items on a mortgage. It protects the lender — not you — if you stop making payments, and it's typically required when your down payment is under 20% on a conventional loan.

How much PMI costs

PMI usually runs between 0.3% and 1.5% of your loan amount per year, billed monthly. On a $280,000 loan, that can mean anywhere from about $70 to $350 a month. The exact rate depends on your credit score and down payment — the smaller your down payment and the lower your score, the higher the premium.

How to remove PMI

• Reach 20% equity and request cancellation in writing from your servicer.
• Let it cancel automatically — by law, conventional PMI terminates once your balance reaches 78% of the original value on many loans.
• Get a new appraisal if your home has appreciated enough to push you past 20% equity sooner (lender rules apply).
• Refinance into a new loan once you have enough equity, which can also lower your rate.
• Make extra principal payments to hit the equity target faster.

FHA loans are different

FHA loans use mortgage insurance premiums (MIP) instead of PMI, and on most FHA loans the annual premium lasts the life of the loan when you put down less than 10%. That's why many FHA borrowers refinance into a conventional loan once they reach 20% equity. You can compare the two in our FHA mortgage calculator.

Is avoiding PMI always the right move?

Not always. Waiting years to save a full 20% down can cost more in rent than paying PMI for a period — especially if prices are rising in your market. Model three scenarios: buy sooner with PMI, wait for 20% down, or buy a less expensive home. The best choice is the one that fits your timeline and cash reserves, not a blanket rule.

Our main mortgage calculator automatically adds PMI when your down payment is under 20% and removes it at 20% or above. For the exact rule in our math, see how we calculate.