PMI is often described as “wasted money” — but that’s only half the story. Understanding it helps you minimize the cost and eliminate it as fast as possible.
What Is PMI?
Private Mortgage Insurance protects the lender (not you) if you default. It’s required on conventional loans when your down payment is less than 20% — i.e., when your LTV (loan-to-value ratio) is above 80%.
How Much Does PMI Cost?
PMI typically runs 0.5–1.5% of the loan amount annually, depending on:
- Loan-to-value ratio (higher LTV = higher PMI)
- Credit score (lower score = higher PMI)
- Loan term
On a $400,000 loan at 0.8% PMI: $3,200/year, or $267/month.
When Is PMI Required?
- Conventional loans with less than 20% down
- Some loan programs automatically include mortgage insurance (FHA requires MIP regardless of down payment)
VA loans never require PMI. USDA loans have a funding fee instead.
How to Get Rid of PMI
Option 1: Wait for 20% equity The Homeowners Protection Act (HPA) requires lenders to cancel PMI when your loan balance falls to 80% of the original appraised value (based on your original amortization schedule).
Option 2: Request cancellation at 80% LTV You can proactively request PMI cancellation when your balance reaches 80% of the original purchase price, based on your payment schedule.
Option 3: Leverage appreciation If your home has appreciated, your LTV based on current value may already be at or below 80%. Some lenders allow you to request a new appraisal and cancel PMI based on the updated value.
Option 4: Refinance If you have 20% equity based on current value, refinancing eliminates PMI entirely.
We can calculate your PMI elimination timeline and evaluate whether a refinance makes sense given your current equity position.