What PMI is
Private mortgage insurance (PMI) is usually required on a conventional loan when you put down less than 20% of the home's price. It protects the lender, not you, if the loan is not repaid. You typically pay it as part of your monthly payment.
Three ways PMI ends under federal law
The Homeowners Protection Act covers most conventional mortgages on a primary residence closed since July 29, 1999. It measures progress against the home's original value, which is usually the lower of the purchase price and the appraised value when you bought, or, if your loan is a refinance, the appraised value used for that refinance.
- You can ask for it to be removed once your loan balance reaches 80% of the original value, on schedule or sooner through extra payments. You generally need to ask in writing, be current with a good payment history, and may need to show the home has not lost value and that there is no second loan on it.
- It must end automatically once your balance is scheduled to reach 78% of the original value, as long as you are current on payments.
- It must end at the midpoint of the loan term (15 years into a 30-year loan, for example) if you are current, even if the 78% point has not been reached.
For a fixed-rate loan, your lender gives you a schedule at closing showing when you can request removal and when PMI will end. For an adjustable-rate loan, you get a notice that your servicer will tell you when you can request removal. Some higher-risk loans follow different rules, so check your own disclosure or ask your servicer.
Ways to drop it sooner
- Extra principal payments bring forward the date your balance reaches 80% of the original value, the point at which you can request removal.
- A rise in your home's value, through the market or improvements, does not count under the federal rules, which use the original value. Many servicers will still consider removal based on a new appraisal, under their own or the loan investor's rules, which usually require the loan to have been open for a minimum time. Ask your servicer what applies before paying for an appraisal.
- Refinancing into a new loan at 80% loan-to-value or below removes PMI, though the refinance has its own costs to weigh.
Loans where these rules work differently
- FHA loans carry a mortgage insurance premium (MIP), not PMI, and the Homeowners Protection Act does not apply. For most FHA loans taken out since mid-2013, MIP lasts 11 years with a down payment of at least 10%, and for the life of the loan with less; refinancing into a conventional loan is the usual way out of lifetime MIP. FHA loans taken out between 2001 and mid-2013 follow earlier rules, under which MIP ends at 78% of the original value (after at least five years on loans longer than 15 years). Ask your servicer how that applies to your loan, including whether extra payments count.
- Lender-paid mortgage insurance is built into your interest rate, so there is no separate premium to cancel. Only a refinance changes it.
- VA loans have no monthly mortgage insurance. Most borrowers pay a one-time funding fee instead, though some veterans, including those receiving VA disability compensation, are exempt.
- USDA guaranteed loans carry an annual guarantee fee, paid monthly, which generally lasts for the life of the loan. The Homeowners Protection Act does not apply to it.
Running the numbers
The PMI Calculator estimates the monthly premium from your home price, down payment and credit score. It shows the loan-to-value point where PMI comes off, how long that takes at your current payment, the total PMI paid, and the savings from reaching 20% equity faster. If you enter an expected appreciation rate, an earlier removal it shows depends on your servicer's rules for removal based on current value, which the federal rules do not require; those rules usually call for a new appraisal and a minimum loan age, and may require more than 20% equity. Your servicer's own figures are the ones that count for an actual removal request.