What Is PMI and How Do You Get Rid of It?

Private mortgage insurance, or PMI, is one of the most misunderstood line items on a mortgage. It protects the lender — not you — if you stop making payments, and it's typically required when your down payment is under 20% on a conventional loan.

How much PMI costs

PMI usually runs between 0.3% and 1.5% of your loan amount per year, billed monthly. On a $280,000 loan, that can mean anywhere from about $70 to $350 a month. The exact rate depends on your credit score and down payment — the smaller your down payment and the lower your score, the higher the premium.

How to remove PMI

• Reach 20% equity and request cancellation in writing from your servicer.
• Let it cancel automatically — by law, conventional PMI terminates once your balance reaches 78% of the original value.
• Get a new appraisal if your home has appreciated enough to push you past 20% equity sooner.
• Refinance into a new loan once you have enough equity, which can also lower your rate.

FHA loans are different

FHA loans use mortgage insurance premiums (MIP) instead of PMI, and on most FHA loans the annual premium lasts the life of the loan when you put down less than 10%. That's why many FHA borrowers refinance into a conventional loan once they reach 20% equity. You can compare the two in our FHA mortgage calculator.

Our main mortgage calculator automatically adds PMI when your down payment is under 20% and removes it at 20% or above, so you can see the real impact on your monthly payment instantly.