Private Mortgage Insurance (PMI): Cost and How to Cancel It

When is PMI required on a conventional loan?

PMI is generally required when your loan-to-value ratio is above 80%, which is another way of saying your down payment is under 20%, per the CFPB. Put 20% or more down and no PMI is required.

Here's why it exists. A conventional loan has no government insurance behind it, so when the borrower's equity cushion is thin, Fannie Mae and Freddie Mac require a private insurer to stand behind part of the risk. You pay the premium, but the insurance protects the lender, not you. That sounds like a raw deal until you see what it buys: PMI is the reason a conventional loan works at 3% or 5% down instead of demanding 20%. For a lot of my buyers, paying PMI for a few years beats renting for the decade it would take to save a full 20%. The down payment decision and the PMI decision are really one decision, and I walk through that trade in the conventional down payment guide.

How much does PMI cost?

It varies by credit score and LTV (and MI provider), per the CFPB. That's not a dodge; it's the actual pricing structure. There is no flat PMI rate the way there's a posted FHA premium, so any single number you read online is somebody's average, not your cost.

The mechanics: when your loan is submitted, the lender gets quotes from private mortgage insurance companies, and those insurers price your premium from a risk grid. Two inputs dominate it. Your credit score sets the tier, and conventional credit tiers are steep: the same loan can carry a very different premium for a 620 score than for a 760. Your LTV sets the exposure: a 5%-down loan at 95% LTV costs more to insure than a 15%-down loan at 85%. Loan size, occupancy, and the number of borrowers feed in too, and each MI company weights the grid a little differently. That's also why your credit score quietly shapes your whole conventional loan, not just the rate; the conventional credit score guide covers how those tiers work.

How do you cancel or get rid of PMI?

Federal law does most of the work. The Homeowners Protection Act of 1998 gives you the right to request cancellation at 80% LTV, requires your servicer to terminate PMI automatically at 78% LTV, and ends it at the loan midpoint no matter what, per the CFPB.

The detail that trips people up: those thresholds are measured against the original value per the amortization schedule, not against what Zillow thinks your house is worth this morning. The request path at 80% also comes with conditions, including a good payment history and, if the servicer requires it, evidence the value hasn't declined. Two more doors exist outside the HPA's automatic machinery. Many servicers, following Fannie Mae and Freddie Mac servicing policies, will consider PMI removal based on a new appraisal of the home's current value, with their own seasoning and equity requirements; ask your servicer for its written requirements. And refinancing replaces the loan entirely, so if your new loan is at 80% LTV or below, the new loan simply has no PMI; that math lives in the conventional refinance guide.

What does the path to 80% and 78% LTV actually look like?

It's a shorter walk than most buyers assume, because you don't have to build 20% equity from zero; your down payment is a head start. Here's the arithmetic on a sample purchase, computed from the HPA thresholds above:

• Home price: $400,000, with 10% down ($40,000)
• Starting loan: $360,000, which is 90% LTV
• Request cancellation at 80% LTV: balance of $320,000, so $40,000 of principal paid
• Automatic termination at 78% LTV: balance of $312,000, so $48,000 of principal paid

How fast you get there depends on your rate and term, because early payments are mostly interest; your amortization schedule, which you receive at closing, dates each milestone exactly. Three things shorten the walk: extra principal payments (even small ones land entirely on the balance), a shorter term, and appreciation, which doesn't move the HPA's original-value math but can unlock the current-value appraisal path sooner. This example is an illustration of the cancellation thresholds, not a quote, and it deliberately shows no PMI premium, because yours depends on your credit score and LTV. I'll price the real one on your file.

PMI vs FHA MIP: what's the difference?

The headline difference is the exit. Conventional PMI cancels under the Homeowners Protection Act as your equity grows; FHA mortgage insurance on low-down loans lasts the life of the loan, per HUD, and the realistic FHA exit is refinancing.

The second difference is the entry fee: FHA charges an upfront premium on top of the monthly one, and conventional PMI has no upfront charge. The third is how each prices risk: PMI is sharply credit-tiered, while FHA's premium barely moves with your score, which is why FHA often suits lower credit tiers and conventional rewards stronger ones. I've written both sides of this in full, so I won't duplicate them here: the FHA mortgage insurance guide covers the MIP grid and its life-of-loan rules, and the FHA vs conventional comparison runs the two programs side by side with the break-even logic.

What is lender-paid PMI (LPMI) and single-premium PMI?

They're alternative ways to pay for the same insurance. With lender-paid PMI, the lender covers the premium and recovers it through a higher interest rate. With single-premium PMI, you pay the whole premium once, at closing, instead of monthly.

Neither is "no PMI," and I flag any pitch that frames them that way. The trade-offs are real. LPMI lowers the monthly payment line that says PMI, but the higher rate never cancels: when you'd have hit 80% LTV and dropped a monthly premium, the LPMI rate just keeps going until you refinance or sell. Single-premium spends thousands at closing that you typically don't get back if you sell or refinance early. Monthly PMI, the boring default, is also the only version with the full HPA cancellation machinery behind it. Which structure wins depends on how long you'll keep the loan and what the upfront cash could otherwise do, and that's a fifteen-minute conversation with real numbers, not a slogan.