# What is PMI and how do you get rid of it?

> PMI protects the lender on low down payment loans. Ask to drop it at 80% of original value; it ends at 78%.

Source: https://www.walletprep.com/learn/private-mortgage-insurance/ · Updated 2026-10-04 · Housing

Private mortgage insurance (PMI) is a monthly charge most lenders add to a conventional loan when you put down less than 20%. You can ask to cancel it once your balance is scheduled to reach 80% of the home's original value, and it must end automatically at 78%.

## Key facts
- **Who pays PMI.** PMI is usually required on a conventional loan with less than 20% down. It also usually applies when you refinance a conventional loan with less than 20% equity. FHA and VA loans have their own rules.
- **How you pay it.** Most people pay a monthly premium added to the mortgage payment, shown on page 1 of the Loan Estimate. Some pay a one-time premium at closing, shown on page 2 in section B, or a mix of both.
- **Three ways it ends.** You can ask to cancel at 80% of original value. It must end automatically at 78%. And it must end the month after the midpoint of the loan term, which is 15 years into a 30-year loan.
- **What original value means.** Original value is usually the lower of the purchase price and the appraised value when you bought. If you refinanced, it is the appraised value at the refinance.

## Why lenders charge PMI
A lender takes more risk when a buyer has less of their own money in the home. PMI is insurance the lender arranges with a private insurance company, and you pay the premium. If you stop paying the loan, the insurer covers part of the lender's loss.
It does nothing for you if you fall behind. You can still lose your home to foreclosure. What it does do is let you get a conventional loan with a smaller down payment, which can mean buying years sooner.

## What PMI costs
The premium depends on your loan amount, down payment, credit score and the insurer. A larger down payment and a higher credit score usually mean a lower premium. The only reliable number is the one on your Loan Estimate, so get estimates from more than one lender.
To compare offers, look at the total cost, not just the monthly line. Ask each loan officer to add up PMI over a few realistic time frames: the shortest, longest and most likely time you will keep the loan.

## The rules for removing PMI
The Homeowners Protection Act sets the rules for most single-family main homes with loans that closed on or after July 29, 1999. You have the right to ask your servicer to cancel PMI on the date your balance is scheduled to fall to 80% of the original value. You can ask earlier if extra payments got you there sooner.
To qualify, you must ask in writing, be current with a good payment history, show there is no second mortgage on the home and show the home has not lost value. The servicer may ask for an appraisal for that last part.
If you never ask, PMI must still end automatically on the date your balance is scheduled to reach 78% of original value, as long as you are current. If you are behind, it ends shortly after you catch up. Lenders and investors like Fannie Mae and Freddie Mac can offer rules that are better for you, but never worse.

## Ways to avoid or shorten PMI
Saving a 20% down payment avoids PMI on a conventional loan and may get you a lower rate. That is not the only route. Some lenders offer low down payment loans without PMI at a higher interest rate, which can cost more or less than PMI depending on how long you stay.
Once you have PMI, the fastest way out is extra principal. Even a small extra amount each month moves the 80% date closer. If your home has gained a lot of value, ask your servicer whether it will consider a new appraisal under its own rules. That is up to the servicer, not a legal right.

## FHA and VA loans are different
FHA loans charge their own mortgage insurance premium, with up-front and annual parts, and the rules for ending it differ from PMI. VA loans don't have monthly mortgage insurance but usually charge a funding fee. If you have one of these loans, ask your servicer how and when the cost ends.

## A worked example: when Sam can drop PMI
Sam buys a $300,000 home with 10% down, a $270,000 loan at 6.5% for 30 years. Her PMI is $112.50 a month, an assumed figure for the example.

- Original home value: $300,000
- 20% equity needed: −$60,000
- Balance to request removal: = $240,000
- Loan at closing: $270,000
- Balance to request removal: −$240,000
- Principal to pay down: = $30,000
- On schedule: 95
- With $200 extra a month: 58
- PMI avoided by paying extra: $4,162.50

1. 80% of $300,000 is $240,000. Sam must pay her $270,000 balance down by $30,000 before she can ask to cancel.
2. With her $1,706.58 payment alone, the balance reaches $240,000 in month 95. Automatic removal at 78%, $234,000, would come in month 109.
3. Adding $200 a month gets her to $240,000 in month 58. That is 37 fewer months of PMI: 37 × $112.50 = $4,162.50 saved.

## Common mistakes
- **Waiting for automatic removal.** Automatic removal at 78% comes later than your right to ask at 80%. For Sam, that gap is 14 months, or $1,575 of PMI. Put a reminder on your calendar and send the request.
- **Thinking PMI covers you.** PMI pays the lender if you default. It won't make your payments if you lose your job. Disability or life insurance and an emergency fund are what protect you.
- **Paying a big up-front premium.** If you pay PMI in one lump sum at closing and then move or refinance soon after, you may not get any of it back. Compare it with monthly PMI over a realistic time frame.

## Questions people ask
### Can I remove PMI if my home value went up?
The legal right to cancel is based on the home's original value, so rising prices don't count automatically. Some servicers will remove PMI based on a new appraisal under their own rules. Ask your servicer what it requires.

### Is PMI worth it?
It can be, if it lets you buy a home you can afford years sooner. Compare the total PMI you would pay before reaching 80% with the rent you would pay while saving for a 20% down payment, plus how much prices could change meanwhile.

### Does refinancing get rid of PMI?
It can, if your new loan is 80% or less of the home's current appraised value. If you have less than 20% equity at the refinance, you will usually need PMI on the new conventional loan.

### Is PMI tax deductible?
Tax rules on mortgage insurance premiums have changed several times. Check the current IRS Publication 936, or ask a tax professional, before counting on a deduction.

## Do this today
If you pay PMI, find your PMI disclosure or call your servicer and ask for the date your balance is scheduled to reach 80% of original value. Put that date on your calendar with a reminder to send a written cancellation request.

## Sources
- [CFPB: What is private mortgage insurance?](https://www.consumerfinance.gov/ask-cfpb/what-is-private-mortgage-insurance-en-122/)
- [CFPB: When can I remove private mortgage insurance (PMI) from my loan?](https://www.consumerfinance.gov/ask-cfpb/when-can-i-remove-private-mortgage-insurance-pmi-from-my-loan-en-202/)
- [CFPB: What is mortgage insurance and how does it work?](https://www.consumerfinance.gov/ask-cfpb/what-is-mortgage-insurance-and-how-does-it-work-en-1953/)
- [IRS: Publication 936, Home Mortgage Interest Deduction](https://www.irs.gov/publications/p936)

_General education, not personalized financial, tax or legal advice. Figures are examples. Check current rates and limits before you act._