US Real Estate & Mortgage Research Analyst
Published: August 4, 2026 · Updated: August 4, 2026 · 6 min read
Key Takeaways
- • PMI protects the lender when your down payment is below 20%
- • It typically costs about 0.3% to 1.5% of the loan per year
- • Federal law auto-cancels PMI at 78% LTV; you can request it at 80% LTV
- • Paying down the loan or home appreciation can end PMI sooner
- • FHA MIP follows different, often stricter, rules
If you bought with less than 20% down, you are probably paying Private Mortgage Insurance. The good news: PMI is not forever. This guide explains what PMI actually is and the precise moments — backed by federal law — when it ends.
What Is PMI?
PMI is insurance the lender buys (and you pay for) that covers its losses if you default. It is triggered when your loan-to-value (LTV) ratio is above 80% — in plain terms, when your down payment is under 20%. It is not the same as homeowner's insurance, which protects your property; PMI protects the bank's loan.
How Much Does PMI Cost?
Expect roughly 0.3% to 1.5% of the original loan amount per year, scaled by your LTV and credit score. On a $300,000 loan with a 5% down payment and solid credit, that often runs about $120 to $200 per month. Better credit and a larger down payment push the cost down; a thinner down payment and weaker credit push it up. Estimate your specific figure with the PMI & MIP Calculator.
When Does PMI End?
The federal Homeowners Protection Act of 1998 (HPA) sets the rules:
- Automatic cancellation at 78% LTV: When your loan balance falls to 78% of the home's original value, PMI must be removed automatically — provided you are current on payments.
- Request cancellation at 80% LTV: You can ask your servicer to remove PMI once you reach 80% LTV, often with a new appraisal to verify your equity.
- Midpoint of amortization: Even if you never request it, PMI must end no later than when you are scheduled to reach 78% LTV based on the original payment schedule (the "midpoint" rule).
How to End PMI Sooner
- Extra principal payments: Paying more than the minimum accelerates the drop in loan balance toward 78-80% LTV.
- Home appreciation: If your home has gained value, a new appraisal may show you already hold 20% equity, qualifying you to cancel — even if your loan balance hasn't hit the threshold yet.
- Refinance: If your home value has risen and rates are favorable, refinancing to a loan at or below 80% LTV drops PMI (but weigh closing costs).
FHA Loans Are Different
FHA's Mortgage Insurance Premium (MIP) does not follow the same automatic 78% rule for everyone. If your original LTV was 90% or below, MIP cancels at 78% LTV or after 11 years, whichever is later. If you put less than 10% down, MIP generally lasts the life of the loan. FHA also charges an upfront premium. See our PMI & MIP Calculator to compare conventional and FHA insurance costs.
Run the Numbers
Use the PMI & MIP Calculator to estimate your monthly insurance and see when amortization reaches 78% LTV, and the Down Payment Calculator to see how a larger down payment avoids PMI entirely.
Editor Update Note
Reviewed and updated August 4, 2026. Cancellation thresholds reflect the federal Homeowners Protection Act of 1998; FHA MIP rules reflect HUD guidelines. Confirm your specific loan terms and cancellation process with your servicer.
Frequently Asked Questions
What exactly is PMI?
Private Mortgage Insurance (PMI) is insurance that protects your lender — not you — if you stop making payments. Lenders require it on most conventional loans when your down payment is below 20% (loan-to-value above 80%), because a smaller down payment means more risk for the bank. It is a temporary cost of borrowing with a small down payment, not a permanent part of your loan.
When does PMI automatically end?
Under the federal Homeowners Protection Act of 1998, PMI must be canceled automatically once your loan balance reaches 78% of the home's original value — as long as you are current on payments. Many lenders also let you request cancellation earlier, at 80% loan-to-value, usually with a new appraisal to prove your equity.
How can I make PMI end sooner?
Two paths: (1) pay down your loan faster with extra principal payments so the balance hits 78-80% sooner, or (2) benefit from home price appreciation — if your home is worth more now, a new appraisal may show you already have 20% equity and qualify you to cancel. Request cancellation in writing and ask your servicer about their appraisal requirement.
Does PMI ending mean my payment drops?
Yes. When PMI is removed, that portion of your monthly payment disappears, so your total housing payment goes down while your loan balance continues to amortize normally. The principal-and-interest portion does not change — only the insurance premium is gone.
Do FHA loans work the same way?
No. FHA Mortgage Insurance Premium (MIP) follows different rules: if your original loan-to-value was 90% or below, MIP cancels at 78% LTV or after 11 years (whichever is later); if you put less than 10% down, MIP generally lasts the life of the loan until you refinance. FHA has an upfront premium as well as the monthly one.