PMI, or private mortgage insurance, protects the lender, not you, if you stop paying your loan. It's usually required on a conventional loan when you put down less than 20%. The good news: conventional PMI doesn't last forever.
How PMI Works
PMI is most often a monthly charge added to your payment. The cost depends on your down payment, credit score, and loan type. Some borrowers pay it upfront in a single premium, or choose "lender-paid" PMI in exchange for a higher rate.
How to Remove PMI
- Ask to cancel at 80%. Once your balance reaches 80% of the home's original value, you can ask your servicer to remove PMI, if you have a good payment history.
- Automatic removal at 78%. Under federal law, PMI generally ends automatically when your balance is scheduled to reach 78% of the original value.
- Use appreciation. If your home has risen in value, some servicers will remove PMI based on a new appraisal, subject to their rules.
- Refinance. If you have 20% equity, refinancing into a new loan can eliminate it.
PMI vs. FHA Mortgage Insurance
| Conventional PMI | FHA mortgage insurance | |
|---|---|---|
| When required | Under 20% down | On every FHA loan |
| Upfront premium | Usually none | Yes, usually financed |
| How it ends | Can be removed as you build equity | Often lasts the life of the loan unless you refinance |
| Cost driver | Credit score and down payment | Mostly down payment and loan size |
VA Loans Don't Have It
VA loans have no monthly mortgage insurance. Most borrowers pay a one-time funding fee instead.
Is Putting 20% Down Worth It to Avoid PMI?
Not always. Waiting years to save 20% can cost more than PMI, especially if prices rise. Compare your options with real numbers: send me your scenario.
PMI FAQ
How much is PMI?
It depends on your credit score, down payment, and loan, and is usually quoted as a yearly percentage of the loan, paid monthly.
Do Non-QM loans have PMI?
Most Non-QM loans don't require mortgage insurance, even with less than 20% down.
Can I get rid of PMI early?
Yes, once you reach 80% of the original value, or sooner with a new appraisal at some servicers.
In the financial industry since 2015. Licensed loan officer in Los Angeles, California. NMLS #1493724, with UTM Financial, LLC (NMLS #2591548). More about Ivan
This article is general education, not financial, tax, or legal advice. Loan guidelines vary by lender and change often. Not a commitment to lend.