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

PMI (Private Mortgage Insurance) protects your lender — not you — if you default on your loan. It's required on conventional loans when your down payment is less than 20% of the purchase price. PMI typically costs 0.5%–1.5% of the loan amount per year, added to your monthly payment. The good news: unlike FHA's MIP, conventional PMI can be removed once you reach 20% equity.

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Key Facts at a Glance
When PMI is required
Down payment < 20% (conventional)
Typical PMI cost
0.5%–1.5% of loan/year
PMI on $315k loan
~$210–$394/mo
Auto-cancellation trigger
Loan reaches 78% LTV
Request cancellation at
80% LTV (80% or less of original value)

Frequently Asked Questions

How is PMI calculated?
PMI is set as an annual percentage of your loan balance, divided into monthly payments. The rate depends on your credit score, LTV, loan type, and insurer. A 720 credit score with 10% down might get a 0.7% PMI rate; a 660 score with 5% down might pay 1.5%. The premium is recalculated as your balance drops, though most lenders charge a flat rate.
Under the Homeowners Protection Act (1998), lenders must automatically cancel PMI when your balance reaches 78% of the original purchase price — even if you don't ask. At 80%, you can request cancellation. Both thresholds use the original purchase price, not the current market value (unless you get an appraisal).
Yes — if your home value rises and you're now below 80% LTV based on current value, you can request PMI removal. Your lender will require a new appraisal (typically $400–$700) to confirm the value. Significant appreciation since purchase can dramatically accelerate your timeline to PMI-free.
1) Put 20%+ down. 2) Piggyback loan (80-10-10): take a second mortgage for 10% and put 10% down, avoiding PMI on the first mortgage. 3) Lender-paid PMI: lender covers the PMI in exchange for a slightly higher rate. 4) VA loan: no PMI ever. Each approach has tradeoffs — use the calculator to compare.
PMI deductibility has had an on-and-off legislative history. As of the current tax code, the deduction has expired and is not available unless Congress renews it. Check with a tax advisor for the current status, as this changes periodically.
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