What is PMI and who does it protect?

Private mortgage insurance is a policy the lender requires on conventional loans with less than 20% down. It reimburses the lender — not the borrower — if the loan defaults. It's typically required whenever the loan-to-value ratio starts above 80%.

How much does PMI cost?

Typically 0.5% to 1.5% of the original loan amount per year, split into monthly payments, though the exact rate depends on your credit score, down payment size, and loan type. On a $300,000 loan, that's roughly $125 to $375 a month.

When does PMI automatically end?

Under the Homeowners Protection Act, the lender must automatically cancel PMI when your loan balance is scheduled to reach 78% of the home's original value, based on the original amortization schedule, as long as you're current on payments. It must also terminate at the amortization schedule's midpoint at the latest, regardless of the LTV.

Can I get PMI removed earlier than the automatic date?

Yes — you can request cancellation once your loan balance reaches 80% of the original value (or current value, if it's appreciated, subject to lender rules and often a new appraisal). You typically need a good payment history and no second liens on the property to qualify for early removal.

Does PMI apply to FHA loans the same way?

No. FHA loans use a separate mortgage insurance premium (MIP) with its own rules — on many FHA loans originated with less than 10% down, MIP lasts for the life of the loan and doesn't cancel automatically the way conventional PMI does. Refinancing into a conventional loan is the usual way to remove it.

Guide

PMI explained: what it costs and when it drops off

PMI protects the bank if you default — you pay for it, but it doesn't protect you. It's also not forever: federal law sets an automatic cutoff. This is educational information, not financial advice.

By Buğra SözeriPublished September 25, 2026

Put down less than 20% on a conventional mortgage and the lender will almost always require private mortgage insurance (PMI) — an added monthly cost that protects the lender, not you, if the loan defaults. It surprises a lot of first-time buyers because it doesn't show up in the advertised interest rate. This guide covers what PMI costs, the legal triggers that remove it automatically, and how to get it cancelled early. This is educational information, not financial advice.

What PMI actually is

PMI exists because a loan with less equity behind it is riskier for the lender — if the borrower defaults and the home has to be sold, a smaller down payment leaves less cushion to cover the lender's loss. Rather than refuse these loans outright, lenders require the borrower to pay for an insurance policy that reimburses the lender specifically if that happens. It does nothing for the borrower directly — no payout, no protection against foreclosure — which is why it's worth removing the moment you're eligible.

What it costs

PMI typically runs 0.5% to 1.5% of the original loan amount per year, charged as a monthly add-on to the regular mortgage payment. The exact rate depends on your credit score, your down payment percentage, and the loan type — lower down payments and lower credit scores both push the rate higher.

Loan amount	PMI rate	Approx. monthly PMI
$300,000	0.5%	~$125
$300,000	1.0%	~$250
$300,000	1.5%	~$375

This is on top of principal and interest, so it's worth adding to whatever a mortgage calculator shows for the base payment before deciding what you can actually afford — see our how much house can I afford guide for the full picture including taxes and insurance.

The two loan-to-value triggers that end it

The Homeowners Protection Act of 1998 sets two loan-to-value (LTV) thresholds, defined against the home's original value at purchase:

80% LTV — borrower-requested cancellation. Once your loan balance is scheduled to fall to 80% of the original value, you can request PMI cancellation in writing. Lenders can require a good payment history and confirmation there's no second mortgage on the property.
78% LTV — automatic termination. The lender is legally required to cancel PMI automatically when the balance is scheduled to reach 78% of original value, based on the original amortization schedule, as long as payments are current — no request needed.

There's also a backstop: PMI must terminate by the midpoint of the loan's amortization schedule regardless of LTV — for a 30-year loan, that's the 15-year mark. Making extra principal payments reaches the 80% and 78% thresholds sooner than the original schedule assumed; see our guide on extra mortgage payments for how much that can accelerate PMI removal alongside the loan payoff itself.

Requesting early removal

If your home has appreciated since purchase, you may reach 80% LTV based on current value well before the original schedule would predict — but this route typically requires a lender-ordered appraisal (at your cost) and isn't guaranteed; some lenders only recognize the original value for early requests. It's worth asking your servicer directly what their specific requirements are, since the Homeowners Protection Act sets a floor, not a lender's exact process.

PMI vs FHA mortgage insurance

This guide covers PMI on conventional loans. FHA loans use a separate mortgage insurance premium (MIP) governed by different rules — on many FHA loans with less than 10% down, MIP doesn't cancel automatically and can last for the life of the loan. Borrowers in that situation typically remove it by refinancing into a conventional loan once they have enough equity, not by waiting for a termination date.

None of this is financial advice — confirm your loan's specific PMI schedule, rate, and cancellation requirements with your servicer or a qualified financial professional before making a decision based on it.

Frequently asked questions

What is PMI and who does it protect?: Private mortgage insurance is a policy the lender requires on conventional loans with less than 20% down. It reimburses the lender — not the borrower — if the loan defaults. It's typically required whenever the loan-to-value ratio starts above 80%.
How much does PMI cost?: Typically 0.5% to 1.5% of the original loan amount per year, split into monthly payments, though the exact rate depends on your credit score, down payment size, and loan type. On a $300,000 loan, that's roughly $125 to $375 a month.
When does PMI automatically end?: Under the Homeowners Protection Act, the lender must automatically cancel PMI when your loan balance is scheduled to reach 78% of the home's original value, based on the original amortization schedule, as long as you're current on payments. It must also terminate at the amortization schedule's midpoint at the latest, regardless of the LTV.
Can I get PMI removed earlier than the automatic date?: Yes — you can request cancellation once your loan balance reaches 80% of the original value (or current value, if it's appreciated, subject to lender rules and often a new appraisal). You typically need a good payment history and no second liens on the property to qualify for early removal.
Does PMI apply to FHA loans the same way?: No. FHA loans use a separate mortgage insurance premium (MIP) with its own rules — on many FHA loans originated with less than 10% down, MIP lasts for the life of the loan and doesn't cancel automatically the way conventional PMI does. Refinancing into a conventional loan is the usual way to remove it.

Sources & references

Authoritative references cited by this piece. Verified by Buğra Sözeri on the dates shown and re-checked at every deploy.

Consumer Financial Protection Bureau — What is private mortgage insurance? — CFPB's plain-language explanation of PMI, who it protects, and typical costs(as of 2026-09-25)
Homeowners Protection Act of 1998 (12 U.S.C. § 4901 et seq.) — The federal law setting the automatic PMI termination and borrower-requested cancellation rules(as of 2026-09-25)
Freddie Mac — Private Mortgage Insurance (PMI) — Lender-side reference on PMI triggers, LTV thresholds, and removal process(as of 2026-09-25)