The short answer
PMI, or private mortgage insurance, is a monthly charge most lenders add to conventional mortgages when you put down less than 20%. It typically costs about 0.3% to 1.5% of the loan per year, or $150 a month on a $360,000 loan at 0.5%. It protects the lender, not you. By federal law it ends automatically once your balance is scheduled to reach 78% of your home's original value, and you can ask to remove it at 80%, or sooner with extra payments or a new appraisal.
Why PMI exists
Lenders consider a 20% down payment the safe line. When a buyer puts down less, the lender is taking more risk. If the buyer stops paying and the home sells for less than the loan, the lender loses money.
PMI covers that gap. You pay the premium, and if you default, the insurance company pays the lender.
It's worth saying plainly: PMI does nothing for you except make the loan possible. That's not nothing. For many families, PMI is the difference between buying now and saving for years more. But it's a cost to get rid of as soon as you reasonably can. We cover the mechanics in how PMI works.
What PMI costs
PMI is priced mostly on two things: your credit score and the size of your down payment. Better credit and a bigger down payment mean a lower premium.
Most borrowers pay somewhere around 0.3% to 1.5% of the loan amount per year. Here's what that looks like on a $400,000 home with 10% down, a $360,000 loan:
| Yearly PMI rate | Monthly cost | Yearly cost |
|---|---|---|
| 0.3% | $90 | $1,080 |
| 0.5% | $150 | $1,800 |
| 0.75% | $225 | $2,700 |
| 1.0% | $300 | $3,600 |
| 1.5% | $450 | $5,400 |
The difference between the top and bottom of that range is $360 a month for the same house. That's why your credit score matters so much at the time you buy. See how much PMI costs for what drives the price.
When PMI ends on its own
For most conventional loans on a primary home closed after July 1999, the Homeowners Protection Act sets three dates.
At 80%, you can ask. Once your balance reaches 80% of the home's original value, on schedule or sooner through extra payments, you can request cancellation in writing. You need a good payment history, no second mortgage, and proof the home hasn't lost value.
At 78%, it ends automatically. Your servicer must cancel PMI when your balance is scheduled to reach 78% of the original value, as long as you're current on payments.
At the halfway point, it ends regardless. On a 30-year loan, PMI must end after 15 years, even if the balance is still above 78%.
"Original value" means the lower of the purchase price or the appraised value when you bought.
On our $360,000 example at 6.5%, regular payments reach 80% of the original value after 7 years and 11 months, and 78% after 9 years and 1 month. More detail is in when PMI comes off automatically.
How much PMI you'll pay in total
Here's the total PMI paid until automatic cancellation at 78%, on a $400,000 home at 6.5%, with PMI at 0.5% a year:
| Down payment | Loan | Monthly PMI | PMI ends automatically | Total PMI paid |
|---|---|---|---|---|
| 5% | $380,000 | $158 | 11 years, 3 months | $21,375 |
| 10% | $360,000 | $150 | 9 years, 1 month | $16,350 |
| 15% | $340,000 | $142 | 6 years, 3 months | $10,625 |
At a 1% PMI rate, every total in that table doubles. Waiting for automatic cancellation is the most expensive way out. A free payoff projection shows exactly when your own PMI is scheduled to end.
Five ways to get rid of PMI sooner
1. Ask at 80% instead of waiting for 78%. It sounds small. On our 10% down example, requesting cancellation the month the schedule hits 80% saves 14 months of PMI, about $2,100, for the price of a letter.
2. Make extra principal payments. Extra payments push your balance to 80% sooner:
| Extra each month | Reach 80% after | PMI saved vs. waiting for 78% |
|---|---|---|
| $100 | 6 years, 5 months | $4,800 |
| $200 | 5 years, 4 months | $6,750 |
| $500 | 3 years, 8 months | $9,750 |
Those figures count PMI only. The same extra payments also cut years of interest. An extra $200 a month on this loan saves about $108,900 in interest over its life. See how to get rid of PMI early.
3. Get a new appraisal. If your home has gained value, your loan may already be below the line based on today's value. Many lenders allow cancellation at 75% of current value after two years, or 80% after five. See whether a new appraisal can remove PMI.
4. Refinance. If rates make sense and your new loan is 80% or less of your home's current value, a refinance can drop PMI. It comes with closing costs, so it rarely makes sense for PMI alone. See does refinancing get rid of PMI.
5. Improve the home. Some lenders count value added by major improvements when you request cancellation based on current value. Ask your servicer how they treat remodeling before you count on it.
FHA loans play by different rules
FHA loans don't have PMI. They have their own mortgage insurance, called MIP, with an upfront charge and an annual premium. For most FHA borrowers who put down less than 10%, MIP lasts for the life of the loan. We compare the two in PMI vs. FHA mortgage insurance and explain the exits in how to remove FHA mortgage insurance.
PMI isn't the coverage your family needs
PMI is easy to confuse with mortgage protection insurance. They're opposites. PMI pays your lender if you default. Mortgage protection pays your mortgage if something happens to you, so your family keeps the house. If your household depends on your income, the second one is the one worth having.
What happens after PMI ends
The day PMI comes off, you have a new $150 or more each month. Most people let it disappear into spending. Pointed at your principal instead, it can take years off your loan. See what to do once PMI ends, and why reaching 20% equity is a bigger milestone than most homeowners realize.
It's also a natural moment to think bigger. Ridgewell's Mortgage Accelerator Program is designed to change how your mortgage is structured, so the income you already have does more of the work. For qualifying households, it is designed to pay off a home in as little as 5 to 7 years.
Payoff timelines are illustrations for qualifying households and are not guaranteed.
Where to start
Find your PMI. Look at your latest mortgage statement or escrow breakdown and write down the monthly amount. Then find your original home value and your current balance, and divide. If you're anywhere near 80%, call your servicer and ask what they need to cancel it.
To see how fast your own loan could reach 80%, and what comes after, get a free payoff projection from a licensed agent.
Examples assume a $400,000 home and a 30-year fixed mortgage at 6.5%, with PMI at 0.5% of the original loan amount per year, principal and interest only, figures rounded. PMI rules described apply to most conventional loans on single-family primary residences closed after July 1999. Your lender's requirements may differ.
