By Victor Santos · OnPoint Mortgage Pro · Updated November 12, 2026

TL;DR: Private Mortgage Insurance (PMI) is a premium you pay on a conventional loan when your down payment is less than 20%. It protects the lender, not you. Typical cost runs 0.46% to 1.50% of the loan each year, and it gets added to your monthly payment. The good news: there are five ways to get rid of PMI, and one of them happens automatically. This guide walks through every path, with the exact rules Fannie Mae, the CFPB, and federal law use to decide when PMI comes off.

What Is PMI (and What It's Not)

Private Mortgage Insurance is a policy a lender buys to cover their losses if a borrower defaults on a conventional mortgage. The borrower pays the premium every month. If the loan goes into foreclosure, the insurer pays the lender, not the borrower's family. That is worth stating clearly because most buyers assume PMI protects them. It does not.

PMI only applies to conventional loans (loans eligible for sale to Fannie Mae or Freddie Mac) with less than 20% down. Other loan types have their own insurance structures and the rules are different:

• FHA loans charge Mortgage Insurance Premium (MIP), not PMI. The rules are far less flexible — see Path 4 below.
• VA loans charge a one-time VA funding fee, no monthly mortgage insurance. Veterans currently receiving VA disability compensation are exempt from the fee entirely.
• USDA loans charge a guarantee fee that functions like PMI but has its own schedule.

So the first question to ask before worrying about PMI is: what loan type am I actually in? If you are not sure, your Loan Estimate will have the answer.

When PMI Kicks In

PMI is required on a conventional loan any time the loan-to-value ratio (LTV) exceeds 80% at origination. LTV is just the loan amount divided by the home's value.

Here is what that looks like on a $600,000 home in Orange County (a reasonable example for our 9-state market, which includes California, Texas, Florida, Virginia, and five others):

• 20% down ($120,000) → 80% LTV → no PMI
• 10% down ($60,000) → 90% LTV → PMI required
• 5% down ($30,000) → 95% LTV → PMI required, higher rate
• 3% down ($18,000) on Fannie HomeReady or similar → 97% LTV → PMI required, highest rate

The higher your LTV, the higher the PMI rate the insurer charges, because the insurer is taking on more risk.

What PMI Actually Costs

The Urban Institute's Housing Finance Policy Center puts typical PMI premiums at 0.46% to 1.50% of the loan amount per year. The spread inside that range is driven mostly by two things: your credit score and your LTV.

How wide is the credit-score spread? Enact Mortgage Insurance (formerly Genworth) publishes a rate card showing the following for a 90% LTV, 30% coverage conventional loan:

• FICO 760+: approximately 1.66% of loan annually
• FICO 620-639: approximately 4.06% of loan annually

That is a roughly 2.4x spread for the same loan, same down payment, driven entirely by credit. On a $500,000 loan, the difference between the two FICO bands is roughly $1,000 a month in PMI alone. This is one of the strongest arguments for pulling your score up before you apply.

One more cost note worth stating plainly: PMI is not tax-deductible for the 2026 tax year. The itemized deduction for mortgage insurance premiums expired after the 2021 tax year and has not been reinstated as of this writing. The IRS says so directly in Publication 936: “The itemized deduction for mortgage insurance premiums has expired. You can no longer claim the deduction.” If you see older articles saying otherwise, they are stale. Check with your CPA before you rely on anything tax-related.

PMI also counts as part of your monthly housing payment for debt-to-income (DTI) purposes, which means a higher PMI premium directly shrinks the house you qualify for. If you want to see the exact impact on your buying power, our Mortgage Affordability Calculator lets you dial in PMI and see the difference.

The 4 Types of PMI

Not all PMI is structured the same way. There are four forms you may be offered:

1. Borrower-Paid Monthly PMI (BPMI)

The default. You pay a monthly premium that shows up on your mortgage statement alongside principal, interest, taxes, and insurance. This is the structure that qualifies for the cancellation and termination rules below.

2. Lender-Paid PMI (LPMI)

The lender pays the PMI premium as a single lump sum at closing, and recovers the cost by charging you a slightly higher interest rate for the life of the loan. Your monthly payment does not have a separate PMI line. Tradeoff: there is no PMI to cancel, so you keep paying the higher rate even after you cross 20% equity. Only makes sense if you intend to keep the loan less than 7-8 years without refinancing.

3. Single-Premium PMI

You pay the entire PMI premium in one upfront payment at closing. Can be financed into the loan or paid out of pocket. Works well if someone else (seller, builder, gift) is contributing to closing costs and you want to use that credit to kill PMI forever.

4. Split-Premium PMI

Part upfront, part monthly. A middle path between single-premium and monthly. Less common.

Ninety-plus percent of borrowers end up on BPMI by default. If you have reason to want one of the other structures, you need to ask your loan officer for a comparison quote before you lock.

How PMI Is Calculated

Mortgage insurers price risk the same way lenders do, weighted by:

• Credit score — the single biggest driver, as the Enact numbers above show
• LTV — higher LTV = higher rate
• Loan type and term — 30-year fixed vs. 15-year vs. adjustable-rate all price differently
• Debt-to-income ratio — some insurers add surcharges above 45% DTI
• Property type — condo and investment property typically carry surcharges
• Occupancy — primary residence, second home, or investment property

The pricing cliff is real. Going from a 739 FICO to a 740 FICO (or 759 to 760) can noticeably drop your PMI rate because insurers price in tiered bands. If you are close to a tier boundary when you apply, that is worth two or three weeks of credit cleanup before you submit.

5 Ways to Get Rid of PMI

This is the section most buyers come to this page for. There are five paths off PMI, each with its own rules and seasoning requirements.

Path 1: Automatic Termination at 78% LTV

Under the Homeowners Protection Act of 1998 (HPA), your servicer must automatically terminate PMI on the date your loan balance is first scheduled to reach 78% of the original value of the home, based on the initial amortization schedule. Two things to notice there:

• “Original value” means the lesser of the purchase price or the original appraised value. Rising home values do not change the trigger.
• “Based on the initial amortization schedule” means extra principal payments do not accelerate this termination. If you want credit for paying down early, that falls under Path 2.

You must also be current on payments on that scheduled date. Rule applies to residential mortgages consummated on or after 7/29/1999. The statutory language is in 12 USC § 4902.

Path 2: Borrower-Requested Cancellation at 80% LTV

Under the same HPA, you can request cancellation when your loan balance reaches 80% of the original value, if you meet the law's “good payment history” test and the loan is in good standing.

The statutory “good payment history” definition is more precise than the shorthand you will see repeated online. Per 12 USC § 4901(4) it means both of the following:

• No payment 60 or more days past due during the 12-month period beginning 24 months before the cancellation date (i.e., looking at months 13–24 back), AND
• No payment 30 or more days past due during the 12-month period preceding the cancellation date (the most recent 12 months).

The request has to be in writing. Your servicer may also require a current appraisal to confirm the value hasn't declined, and will want evidence that no subordinate liens (second mortgages, HELOCs) sit behind the first.

Path 3: Appraisal-Based Cancellation (Market Appreciation)

If the home has gone up in value since closing, you may not have to wait for scheduled amortization to get you to 80% or 78% LTV. The new, higher value can get you there faster. The catch: Fannie Mae and Freddie Mac have strict seasoning and LTV rules for this path, and they are different depending on how long you have owned the home.

Per Fannie Mae Servicing Guide B-8.1-04, for a primary-residence single-family home:

Investment property and 2-4 unit properties are tighter: ≤70% LTV, and the seasoning must be more than 2 years.

Important wrinkle: the appraisal has to be ordered by the servicer (not you), using an approved appraiser, with an interior and exterior inspection. You pay for it, typically $500-$800. If the appraisal comes back short, you are out the cost and PMI stays. Only pursue this path if you have hard local comps that support the number.

Path 4: Refinance to Drop PMI

If current rates are lower than yours, or you are in an FHA loan and want out of lifetime MIP, refinancing can kill mortgage insurance in one move. The math only works if: (a) the new rate meaningfully beats your current rate and covers closing costs inside your remaining timeline, or (b) you are switching loan types to escape MIP that will never go away on its own.

About FHA MIP specifically: for FHA case numbers assigned on or after June 3, 2013, the MIP termination rule is:

• Original LTV at or below 90% (down payment of 10% or more): MIP terminates after 11 years
• Original LTV above 90% (down payment of less than 10%): MIP stays for the life of the loan — the only way off is to refinance to a conventional loan

If you put less than 10% down on an FHA loan, refinancing to a conventional loan once you reach 80% equity is often the single biggest payment reduction available to you. Our Refinance Calculator and current mortgage rates can show you whether the math works right now.

Path 5: Principal Recast with a Lump Sum

If you come into a bonus, inheritance, or sale proceeds, you can drop a lump sum against principal and ask your servicer to “recast” the loan — re-amortize the remaining balance over the remaining term. If the lump sum pushes your balance below 80% of the original value, you can then request cancellation under Path 2. Not every servicer allows recasting; ask before you send the check. (Also note: recasting is not the same as refinancing. It keeps your current rate and term.)

PMI vs. Waiting for 20% Down

A common question we hear from first-time buyers: “Should I keep saving until I have 20% down so I can avoid PMI entirely?” The honest answer is: it depends on what your local market is doing, and on the opportunity cost of waiting.

Say you are shopping for a $600,000 home with 10% down. Your PMI might run $200-$400 a month depending on credit. Over 3 years, you pay $7,200 to $14,400 in PMI. If that same home appreciates even 3% annually over those 3 years, it is worth about $55,000 more, and the rent you pay while waiting is money you never get back. In most of our markets, waiting to avoid PMI costs more than paying it.

That calculus flips in a flat or declining market, or if your down payment trajectory would get you to 20% in under 12 months. There is no one-size answer. We run the numbers both ways for clients before they decide. Our affordability guide and first-home step-by-step both work through this tradeoff in detail.

OnPoint's Lower-PMI and No-PMI Paths

If PMI is the piece of the monthly payment you want to minimize, there are several structures worth asking about:

• OnPoint's Zero to Hero program: a purchase path with $0 OnPoint lender fees. Does not eliminate PMI itself, but by zeroing out our fees, we free up budget that can go toward a larger down payment to bring LTV lower.
• No-Points buy-down: similar concept — redirect what you would pay in points into the down payment stack instead.
• Lender-Paid PMI: (Type 2 above) — useful if you plan to sell or refi within 7 years.
• 80/10/10 piggyback: a first mortgage at 80% LTV plus a second mortgage or HELOC at 10% LTV, with 10% down. No PMI on the first. Run both payments through our blended rate calculator to compare against a single 90% LTV loan with PMI.
• VA loans: no monthly mortgage insurance ever. Period. If you are veteran-eligible, this is almost always the best path.
• USDA loans: no PMI, but has its own guarantee fee and is limited to designated rural areas.

Side note: PMI is often collected through your escrow account, so if you are shopping and seeing “impounds required,” PMI is one of the reasons why.

Frequently Asked Questions

Is PMI tax-deductible in 2026?

No. The itemized deduction for mortgage insurance premiums expired after the 2021 tax year. IRS Publication 936 states this directly. If any 2026 tax legislation restores it, we will update this page.

How much does PMI cost on a $500,000 loan?

At the Urban Institute's typical range of 0.46% to 1.50% annually, PMI on a $500,000 loan runs between $192 and $625 per month. Where you fall inside that range depends on your credit score, LTV, DTI, and property type. Credit score is the biggest lever.

Can I remove PMI without refinancing?

Yes, on a conventional loan. Three non-refinance paths: automatic termination at 78% LTV (based on original amortization schedule), requested cancellation at 80% LTV with good payment history, or appraisal-based cancellation if your home has appreciated past Fannie Mae's LTV thresholds. On an FHA loan, your options are far narrower — see Path 4.

Does PMI go away automatically?

Yes, on a conventional loan, by law. When your scheduled loan balance first hits 78% of the original home value, your servicer must terminate PMI if you are current on payments. No request needed. The caveat: “scheduled” means based on the original amortization schedule, so extra principal payments do not speed this up.

Is there a loan with no PMI and less than 20% down?

Several. VA loans for eligible veterans have no mortgage insurance at all. USDA loans in designated rural areas have no PMI (they have a guarantee fee instead). Lender-Paid PMI eliminates the monthly PMI line in exchange for a higher rate. An 80/10/10 piggyback structure uses a second mortgage to keep the first at 80% LTV.

Does my credit score affect my PMI rate?

Significantly. Enact's published rate card for a 90% LTV conventional loan shows a 760+ FICO paying about 1.66% annually, versus 4.06% at 620-639 — roughly 2.4x more for the same loan. Credit score is the single biggest driver of PMI pricing.

How long does FHA mortgage insurance last?

Depends on your down payment. For FHA case numbers assigned on or after June 3, 2013: if your original LTV was at or below 90% (10% or more down), MIP terminates after 11 years. If your original LTV was above 90% (less than 10% down), MIP lasts for the life of the loan, and the only way off is refinancing to a conventional loan.

If my home value goes up, can I ask for PMI to come off?

Yes, but there are seasoning rules. Per Fannie Mae, if it has been 2-5 years since closing and your current LTV is 75% or less, you can request cancellation based on appreciation. More than 5 years, the threshold loosens to 80%. Under 2 years, you only qualify if the value increase came from borrower-paid substantial improvements. Your servicer orders the appraisal; you pay for it.

Bottom Line

PMI is not a trap. It is a tool that lets buyers get into a home with less than 20% down, and it comes off on a predictable schedule once you cross the equity threshold. The mistakes we see most often are: (1) assuming PMI protects the borrower (it doesn't), (2) waiting years to save for 20% in a rising market (often a worse deal than paying PMI), and (3) not knowing that FHA MIP works differently and may require a refinance to escape.

If you are paying PMI right now and are not sure which path off it makes sense, or you are shopping with less than 20% down and want to compare structures, that is exactly the kind of math we run. Call (877) 870-0007 or request a callback through our contact page.

OnPoint Mortgage Pro is a California-licensed mortgage broker (NMLS #888844, company NMLS #2134550, DFPI 60DBO-150320) serving California, Colorado, Florida, Idaho, Maryland, New Hampshire, South Carolina, Texas, and Virginia. Information in this article is for educational purposes only and is not legal or tax advice. Consult a licensed tax professional for your specific situation.

Equal Housing Opportunity.