PMI: What It Is and How to Remove It

Private Mortgage Insurance, or PMI, is a policy that protects the lender — not you — if you default on a conventional loan. It is typically required whenever a conventional down payment is below 20% of the home's purchase price, because a smaller down payment means the lender is financing a larger share of the property's value and carries more risk if home values drop.

Why PMI exists

Loan-to-value ratio (LTV) — the loan balance divided by the home's value — is the key number here. A 10% down payment leaves a 90% LTV; a 20% down payment leaves an 80% LTV. Historically, loans above 80% LTV default at meaningfully higher rates, so lenders require PMI to offset that added risk rather than simply declining the loan or charging a much higher interest rate.

How much PMI typically costs

PMI is usually quoted as an annual percentage of the loan amount, paid in monthly installments alongside your principal and interest. Rates vary by insurer, credit score, LTV, and loan type, but borrower-paid PMI on a conventional loan commonly falls in a range of roughly 0.3% to 1.5% of the loan amount per year. Borrowers with strong credit and a smaller loan-to-value gap land toward the lower end of that range; borrowers with lower credit scores or LTVs closer to 97% land toward the higher end. On a loan in the low-to-mid hundreds of thousands of dollars, that can translate into a meaningful monthly add-on, which is why modeling it accurately matters — our calculator lets you toggle PMI on or off and adjust the rate to match your lender's quote.

PMI is not permanent

Unlike FHA mortgage insurance (covered in our FHA vs conventional guide), conventional PMI is designed to fall away once you have built enough equity. Under U.S. federal law (the Homeowners Protection Act), servicers are required to automatically terminate PMI once your loan balance is scheduled to reach 78% of the home's original value, based on the original amortization schedule, as long as you are current on payments.

Requesting early removal at 80% LTV

You do not have to wait for the automatic 78% cutoff. Once your loan balance reaches 80% of the home's original value — or of its current value, if it has appreciated — you can typically request PMI cancellation directly. Lenders generally require:

• A written request to cancel PMI
• A good payment history, with no late payments in the recent past
• Confirmation that the loan is not subordinate to any other liens
• Sometimes a current appraisal, especially if you are requesting removal based on appreciation rather than scheduled paydown

Three ways to reach 80% LTV faster

1. Extra principal payments. Because PMI removal is tied to your loan-to-value ratio, paying down principal ahead of schedule shortens the time until you cross the 80% threshold. See our extra payments guide for how to model this.

2. Home value appreciation. If your local market has appreciated meaningfully since purchase, your LTV may already be under 80% even without extra payments. Lenders will generally want a new appraisal to confirm current value before approving removal on this basis, and the appraisal cost is usually your responsibility.

3. A one-time lump sum. If you receive a bonus, tax refund, or other windfall, applying it directly to principal can push your balance under the 80% threshold faster than waiting on the regular schedule.

Refinancing to remove PMI

If rates have dropped or your home has appreciated significantly, refinancing into a new loan without PMI can be worth exploring — but only after accounting for closing costs. Use our refinancing break-even guide to check whether the closing costs are recovered quickly enough by the PMI and rate savings to make it worthwhile.

What PMI removal does not affect

Removing PMI only removes that one line item from your payment — it does not change your principal and interest payment, and it does not affect property taxes or homeowners insurance collected through escrow. Many borrowers are surprised their total payment does not drop as much as expected; that is simply because PMI was only ever one component of the full payment. Model the full picture, including escrow, in the calculator before assuming a specific payment reduction.