How to Get Rid of PMI

If you put less than 20% down on a conventional loan, your lender almost certainly charges private mortgage insurance (PMI). It protects the lender, not you, so the sooner it's gone, the better. Here's how removal works.

What PMI costs

PMI usually costs about 0.3% to 1.5% of the loan amount per year, depending on your credit score and down payment, and it's added to your monthly payment. On a $315,000 loan at 0.5% a year, that's about $131 a month.

Three ways PMI ends on a conventional loan

The federal Homeowners Protection Act sets the rules for most conventional loans on a primary home:

You ask for removal at 80%. Once your balance reaches 80% of the home's original value (the purchase price or the original appraisal, whichever is lower), you can ask your servicer in writing to cancel PMI. You usually need a good payment history, and the lender may ask for proof the home hasn't lost value.
Automatic removal at 78%. When your balance is scheduled to reach 78% of the original value, PMI must end automatically, as long as you're current on payments.
Final removal at the halfway point. If neither of those has happened, PMI ends at the midpoint of the loan term (year 15 of a 30-year loan), if you're current.

Key point: automatic removal follows the original schedule. If you've been paying extra, you'll pass 80% much sooner, but nothing happens automatically. You have to ask.

How extra payments speed it up

Example: a $350,000 home with 10% down ($315,000 loan) at 6.5% for 30 years, with PMI of 0.5% a year.

No extra payments: the balance reaches 80% after about 7 years, 11 months.
$300 extra a month: the balance reaches 80% after about 4 years, 4 months, more than three and a half years sooner.

Since PMI here is $131 a month, ending it early is like getting an extra return on top of the interest you save.

See this example in the calculator →

(The calculator shows PMI ending when your actual balance, including extra payments, reaches 78% of the home price. Remember that in real life you can ask to drop it at 80%.)

Using your home's current value

If your home has gone up in value, your loan may already be below 80% of what the home is worth today. Many lenders will remove PMI based on a new appraisal. Rules vary, but loans backed by Fannie Mae or Freddie Mac commonly require the loan to be at least two years old and below about 75% of the current value (80% after five years). You'll usually pay for the appraisal, so call your servicer first and ask what they require.

FHA, VA, and USDA loans are different

FHA loans charge a mortgage insurance premium (MIP) instead of PMI. For most FHA loans since mid-2013, MIP lasts 11 years if you put down at least 10%, and for the life of the loan if you put down less. Often the only way to remove it is to refinance into a conventional loan once you have enough equity.
VA loans don't have monthly mortgage insurance, though most borrowers pay an upfront funding fee.
USDA loans charge an annual guarantee fee for the life of the loan.

Your PMI checklist

Find your home's original value and your current balance on your statement.
Divide balance by original value. Under 80%? Call your servicer and ask about cancellation.
Not there yet? Use the calculator to see how much extra a month gets you to 80% by a target date.
After removal, check your next statement to confirm the PMI charge is gone.

This article is general information, not financial advice. Examples are rounded and assume a fixed-rate loan; your lender's numbers may differ slightly.