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What Is PMI? And 6 Ways to Get Rid of It Faster

PMI is the insurance you pay for... that protects someone else. Here is how it works and how to kick it off your bill sooner.

By Keys & Coffee Editorial Team · Updated · 4 min read

Quick answers

  • PMI = private mortgage insurance on conventional loans with less than 20% down.
  • It protects the lender if you stop paying. You pay the bill.
  • Typical cost: roughly 0.3% to 1.5% of the loan per year, depending mostly on credit score and down payment.
  • You can ask to cancel at 80% loan-to-value, and it must end automatically at 78% on the original schedule.

PMI is a bit like paying for your friend’s phone insurance because you borrowed their phone. Annoying? Yes. But it is also why you can buy a home with 3% to 10% down instead of saving 20% for years.

How much does PMI cost?

It depends mostly on your credit score and how much you put down. Higher score and bigger down payment = cheaper PMI.

ExampleBorrow $360,000 with PMI at 0.6% a year: $360,000 × 0.6% = $2,160 a year, or $180 a month. Over five years that is about $10,800 — a used car’s worth of insurance that does nothing for you.

Your Loan Estimate shows the exact PMI amount, so compare it across lenders.

When does PMI end on its own?

A federal law, the Homeowners Protection Act, gives you three exits on most conventional loans for a primary home:

  1. Ask at 80%. When your balance hits 80% of the home’s original value, you can request cancellation in writing. You generally need a good payment history and no second mortgage, and the lender may ask for proof the home has not lost value.
  2. Automatic at 78%. When your balance is scheduled to reach 78% of the original value, PMI must end automatically if you are current on payments.
  3. Final stop at the halfway point. PMI must end by the midpoint of your loan term (year 15 on a 30-year loan) if you are current.
Myth buster“PMI disappears the moment I reach 20% equity.” Only the automatic cut-off at 78% happens without you lifting a finger. At 80% you must ask. Put a reminder in your calendar.

6 ways to get rid of PMI faster

1. Make extra principal payments

Every extra dollar shrinks your balance and pulls the 80% date closer. See the effect with our extra payment calculator.

2. Use your home’s new value

If prices in your area went up, your equity may be bigger than the payment schedule shows. Many lenders let you remove PMI based on a new appraisal, often after you have owned the home for two years or more and reach a lower LTV threshold such as 75%. Rules vary, so call your servicer and ask for their PMI removal requirements.

3. Renovate smartly

Improvements that add real value, like a kitchen update or an added bathroom, can raise your appraisal. Cosmetic changes usually do not move the needle much.

4. Refinance

If your home is worth more and rates make sense, refinancing into a new loan at 80% LTV or less drops PMI. Only worth it if the numbers work — check with our refinance break-even calculator.

5. Choose lender-paid PMI (at the start)

Some lenders cover the PMI in exchange for a slightly higher rate. No separate PMI line, but the higher rate stays for the life of the loan unless you refinance. Good if you plan to move within a few years.

6. Avoid it from day one

Put 20% down, use a VA loan if eligible (no monthly mortgage insurance), or look at a “piggyback” structure (like 80/10/10) where a second loan covers part of the down payment.

PMI vs FHA mortgage insurance

Conventional PMI FHA MIP
Who has it Conventional loans under 20% down All FHA loans
Upfront fee Usually none 1.75% of the loan
How it ends Ask at 80%, automatic at 78% Life of loan with under 10% down; 11 years with 10%+ down

More on FHA in our FHA loan requirements guide.

FAQ

Is PMI tax deductible?

Federal rules on deducting mortgage insurance premiums have changed several times. Check current IRS guidance or ask a tax professional for your situation.

Can I cancel PMI on an investment property?

The automatic protections of the Homeowners Protection Act focus on primary residences. Investor loans follow the lender’s and investor’s own rules.

Does PMI cover me if I lose my job?

No. PMI protects the lender. Mortgage protection or disability insurance are different products.

Sources: Consumer Financial Protection Bureau guidance on the Homeowners Protection Act; Fannie Mae and Freddie Mac servicing guidelines. Your servicer’s rules may vary.

Keys & Coffee Editorial Team

We turn lender-speak into plain English. We check our numbers against official sources like the CFPB, HUD, Fannie Mae and Freddie Mac, and we update guides when the rules change.

Keys & Coffee is an independent education site. We are not a lender or mortgage broker, we do not take loan applications or payments, and nothing here is financial advice. This site is not affiliated with Axia Home Loans, Axia Financial, LLC, or Planet Home Lending. Rates and rules change often — always confirm details with a licensed loan officer and check any lender on the NMLS Consumer Access site.

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