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

Private mortgage insurance (PMI) is a monthly charge added to conventional loans when you put down less than 20%. On most conventional loans it cancels automatically once you reach 22% equity, and you can request removal at 20%.

What PMI is and why it exists

PMI protects the lender, not you, in case you default. It's required on conventional loans with a down payment under 20% because a smaller down payment represents more risk to the lender. It typically costs somewhere between a few tenths of a percent and about 1.5% of the loan amount per year, split into monthly payments, with the exact cost driven by your credit score and down payment size.

How to get rid of PMI

There are several paths, and knowing them can save you real money:

Automatic termination. By federal law (the Homeowners Protection Act), your lender must automatically cancel PMI once your loan balance reaches 78% of the home's original value, meaning you've built 22% equity through your regular payments.

Request cancellation at 20%. You don't have to wait for automatic termination. Once you reach 20% equity based on the original value, you can request cancellation in writing. You'll typically need a good payment history and sometimes a current appraisal.

Reappraisal after your home gains value. If your home has appreciated or you've made improvements, a new appraisal may show you've crossed the 20% equity threshold sooner than your payment schedule alone would. Lenders have specific rules about how long you must have held the loan for this to apply, often two years, so ask about the exact requirement.

Refinance. If you now have 20%+ equity, refinancing into a new loan without PMI removes it entirely. This only makes sense when the rate and closing costs work in your favor, so run the break-even math first.

The FHA difference worth knowing

This all applies to conventional PMI. FHA loans carry a different charge called MIP (mortgage insurance premium), and on most FHA loans with less than 10% down, MIP lasts the life of the loan. The main way to remove FHA MIP is to refinance into a conventional loan once you have enough equity. This is one of the most important distinctions between FHA and conventional financing.

The practical takeaway

Track your equity. The moment you cross 20% based on your original value, request cancellation rather than waiting for the automatic 22% trigger. And if your home has appreciated meaningfully, ask your lender about a reappraisal-based removal, it can save you months or years of payments.