FAQ
What is PMI and when can I remove it?
Quick Answer
Private mortgage insurance (PMI) protects the lender, not the buyer, and typically applies to conventional loans with less than 20% down at purchase. It's usually charged as part of your monthly payment until your loan balance drops to roughly 78-80% of the home's original value, at which point it can often be removed — either automatically at 78% under federal rules, or earlier by request once you've documented enough equity. Ask your loan servicer about their specific removal process, since exact rules and any appraisal requirements can vary.
Key Takeaways
- PMI protects the lender against default risk on conventional loans with less than 20% down — it does not protect the buyer.
- Federal rules generally require automatic PMI cancellation once your loan balance reaches 78% of the home's original value, assuming your payments are current.
- You can often request PMI removal earlier, once you reach around 80% equity, sometimes requiring a new appraisal to confirm value.
- FHA loans use a different mortgage insurance structure that often can't be removed the same way, depending on your down payment and loan start date.
- PMI cost varies by credit score, loan type, and down payment size — ask your lender for the specific cost at different down payment levels before deciding how much to put down.
PMI is one of those costs that catches buyers off guard mid-conversation with a lender, mostly because it's easy to confuse with homeowners insurance, which is a completely different thing.
What PMI Actually Protects
Private mortgage insurance protects the lender, not you, against the risk of default on conventional loans where the buyer put down less than 20%. It doesn't protect your investment in the home or pay off your loan if something happens to you — that's what life insurance or a separate mortgage protection policy would do.
Not the same as homeowners insurance
PMI and homeowners insurance are entirely different products serving different purposes. Homeowners insurance protects your home and belongings; PMI protects your lender's financial interest in your loan.
When PMI Typically Goes Away
~78% of original value
Automatic Cancellation
~80% of original value
Request-Based Removal
Conventional loans, <20% down
Applies To
Different rules — often longer
FHA Equivalent
Under federal rules, PMI on most conventional loans must be automatically cancelled once your loan balance reaches 78% of the home's original value, as long as you're current on payments. You can often request earlier removal once you reach approximately 80% equity, though your servicer may require a new appraisal to confirm the home's current value supports that request.
Dave's Local Insight
I tell buyers to actually calendar this — mark the date your loan balance is expected to hit that threshold and follow up with your servicer directly rather than assuming it happens automatically on time.
Why FHA Loans Work Differently
FHA loans use a separate mortgage insurance premium (MIP) structure rather than conventional PMI, and depending on your down payment and when your loan originated, that insurance may last for the life of the loan rather than being removable at a set equity threshold. If you have an FHA loan and want it removed, refinancing into a conventional loan once you have enough equity is often the more realistic path.
How to Think About PMI When Deciding on a Down Payment
Questions to ask your lender about PMI
- What would my specific PMI cost be at 5%, 10%, and 15% down, given my credit profile?
- At what loan balance would PMI be automatically cancelled versus removable by request?
- Would removing PMI early require a new appraisal, and what does that cost?
- If I'm considering an FHA loan, does my specific insurance premium ever expire, or only through refinancing?
Bottom Line
PMI is a real, often underestimated cost of putting down less than 20% on a conventional loan, but it's not permanent — it's generally removable once you reach roughly 20% equity, either automatically or by request. FHA loans work differently and often require a refinance to eliminate mortgage insurance. Either way, ask your lender for the specific numbers rather than assuming a general rule applies exactly to your loan.
Related Questions
Sources
Written by Dave Brown
REALTOR®, LPT Realty
Dave Brown is a REALTOR® with LPT Realty who has spent his career helping families buy, sell, and settle into life in Woodbury, Minnesota and the surrounding East Metro. He writes Woodbury Living as a local resource first and a business second — every guide is meant to leave you better informed, whether or not you ever work together.
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