Private mortgage insurance is the fee you pay so your lender feels okay about the fact that you didn't put 20% down. That's it. That's the whole emotional core of PMI: it exists to protect the bank, not you, and once you understand that, the rest of it — pricing, structure, removal — stops feeling like a mystery and starts feeling like a math problem with a deadline.

What PMI actually is

On a conventional loan (one not backed by FHA, VA, or USDA), if your down payment is less than 20% — meaning your loan-to-value ratio (LTV) is above 80% — your lender will almost always require private mortgage insurance. If you stop paying your mortgage and the lender has to foreclose, PMI pays out to the lender to cover part of the loss. You keep paying the premium every month; you get none of the payout if things go sideways. It's insurance on their risk, priced into your budget.

This isn't a scam or a junk fee — lending someone 95% or 97% of a home's value genuinely is riskier for the lender, and PMI is what makes that lending possible at all. Without it, most low-down-payment conventional loans simply wouldn't get approved. The problem isn't that PMI exists; it's that a lot of buyers don't realize it's temporary by law, or don't know how to make it disappear the moment they're eligible.

How much PMI actually costs

PMI is priced mainly off two things: your credit score and your LTV. As of 2026, PMI typically runs between about 0.46% and 1.50% of your loan amount per year, split into monthly installments. A borrower with excellent credit (760+) putting down close to 20% might pay near the bottom of that range; a borrower with a 620–639 score and 3–5% down is going to be closer to the top. On a $400,000 loan, that's the difference between roughly $150/month and $500/month for the exact same coverage — which is a very good argument for fixing your credit score before you shop for a mortgage, not after.

A note on this figure: PMI rates move with the private mortgage insurance market and aren't set by a single regulator, so treat 0.46%–1.50% as a current ballpark rather than a fixed table — get an actual quote from your lender before you budget around it.

PMI isn't one product — there are four structures

Most people assume PMI is just a line item on their monthly statement. Sometimes it is. Sometimes it's baked in somewhere you can't see it. There are four common structures, and which one you have changes your removal strategy entirely:

  • Borrower-paid monthly PMI (BPMI) — the default. A separate premium tacked onto your monthly mortgage payment, no upfront cost, and cancellable once you hit the LTV thresholds below. This is what most people mean when they say "PMI."
  • Single-premium PMI — you pay the entire premium as a lump sum at closing (in cash or rolled into the loan), and there's no monthly PMI charge after that. Lowers your monthly payment, but the premium is generally non-refundable if you refinance or sell shortly after — so it's a bet you'll hold the loan for a while.
  • Split-premium PMI — a hybrid: part of the premium paid upfront, the rest spread into smaller monthly payments. Useful if you want a lower monthly PMI hit than BPMI but don't want to (or can't) pay the full single premium.
  • Lender-paid PMI (LPMI) — there's no separate PMI line item at all. Instead, the lender charges you a higher interest rate for the life of the loan to cover the risk. This is the one that trips people up: LPMI cannot be cancelled once you hit 80% or 78% LTV, because it isn't a separate premium — it's baked into your rate. The only way off LPMI is to refinance into a new loan once you have enough equity, which means paying closing costs again and re-shopping your rate. Read the breakdown of all four structures here.

If you don't know which one you have, check your Loan Estimate or ask your loan officer directly before you close — it materially changes how (and whether) you'll ever get rid of this cost without refinancing.

How PMI removal actually works

This is the part with an actual federal law behind it, so pay attention: the Homeowners Protection Act of 1998 (HPA) governs BPMI removal on most conventional, owner-occupied home loans. Three paths off PMI:

1. Borrower-requested cancellation at 80% LTV. You can submit a written request to your servicer to cancel PMI once your loan balance is scheduled to hit 80% of your home's original value — meaning the lower of the purchase price or the appraised value at closing (or the appraised value at refinance, if you've refinanced since). To get approved, you generally need to be current on payments, have a clean payment history, and certify there's no second mortgage or other junior lien on the property. Meet those conditions and the servicer has to grant it — this isn't discretionary.

2. Automatic termination at 78% LTV. Even if you never ask, your servicer is legally required to cancel PMI automatically once your balance is scheduled to reach 78% of the home's original value, as long as you're current on your payments. This is the backstop for people who forget or don't bother to request it — but don't rely on it, because "automatic" still depends on your servicer doing its job correctly, and servicer errors here are not rare.

3. Midpoint termination, regardless of equity. PMI must terminate by the midpoint of your loan's amortization schedule — month 181 of a 30-year loan — even if you haven't hit 78% LTV yet (this can happen if you've made late payments that slowed your equity buildup, for instance).

4. Early removal if your home's value has gone up. This one isn't in the HPA itself — it's a separate path most conventional loans (backed by Fannie Mae or Freddie Mac) allow based on current value instead of original value. Under Fannie Mae's servicing guidelines, if you've owned the home 2–5 years, you can request cancellation once a new appraisal shows your balance at 75% LTV or less; after 5 years, the bar drops to 80% LTV. You'll need to pay for a new appraisal, request it directly with your servicer (they can't solicit you for this — you have to initiate it), and have a clean payment record. In a market where your neighborhood has appreciated fast, this can knock years off your PMI timeline versus waiting to pay down principal alone — worth checking if home values near you have jumped since you closed.

The one everyone confuses: PMI is not FHA's MIP

This mix-up is extremely common and worth its own callout: the Homeowners Protection Act does not apply to FHA loans. FHA mortgage insurance is called MIP (mortgage insurance premium), it's a separate federal program, and it plays by completely different rules:

  • FHA MIP includes an upfront premium (currently 1.75% of the loan amount, financeable into the loan) plus an ongoing annual premium.
  • If you put down less than 10%, MIP stays on the loan for its entire life — there's no LTV threshold that removes it. Your only way out is refinancing into a conventional loan once you have enough equity.
  • If you put down 10% or more, MIP drops off after 11 years — still not tied to a specific equity threshold the way conventional PMI is.

So "wait until I hit 80% LTV and it'll cancel automatically" is true for conventional PMI and simply false for most FHA borrowers. If you're in an FHA loan with under 10% down and you're building equity hoping MIP will just go away, it won't — refinancing out is the actual plan, and it's worth revisiting once rates and your equity position make that math work. See a full FHA MIP vs. PMI comparison here.

The actual move

Know which PMI structure you have, know your original home value, and do the math yourself on when you'll hit 80% and 78% LTV rather than waiting for your servicer to notice — request cancellation the day you're eligible instead of letting "automatic" carry the weight. If your area has appreciated since you closed, get a rough sense of current value before assuming you're years away; a new appraisal might get you there faster than your amortization schedule will. And if you're in FHA-land with under 10% down, stop waiting on MIP to disappear on its own and start tracking when a refinance actually pencils out.

Sources

A note on the numbers: the 0.46%–1.50% PMI rate range and the $150–$500/month example are current as of this search (August 2026) but PMI pricing is set by private mortgage insurers and moves with market conditions —.