What is PMI and why am I paying it?

Private mortgage insurance is charged on conventional loans where the deposit is under twenty percent. It protects the lender, not you — if you default and the sale does not cover the debt, the insurer pays the lender the shortfall and may then pursue you for it. That is worth being clear about, because the name suggests a protection it does not provide. What it buys you is access: it is the mechanism that lets lenders write loans above eighty percent at all.

How much does PMI cost?

Commonly between 0.3% and 1.5% of the loan a year, according to the consumer regulator, driven mainly by your credit score and how much you put down. On a $432,000 loan that spans roughly $108 to $540 a month, which is a wide enough range to be worth shopping. The premium is a percentage of the original loan amount and does not fall as the balance does — it stays flat and then stops entirely.

How do I get rid of PMI?

Five routes exist and it is worth knowing all of them. Three are statutory and use the original value: request at eighty percent, automatic at seventy-eight, and compulsory termination at the midpoint of the term. Two are investor rules that use a current valuation: seventy-five percent once seasoned two to five years, and eighty percent beyond five. Only the automatic termination happens without you. Everything else requires a written request, and the current-value routes need an appraisal you pay for.

Can I cancel PMI because my home went up in value?

Yes, but not through the statutory route — the Act does not address current value at all, which is why the eighty and seventy-eight percent dates never move however much the house gains. What lets you use appreciation is the investor rules: seventy-five percent of current value if the loan is between two and five years old, or eighty percent if it is older. You must initiate the request, provide a valuation acceptable to the servicer, and have no payment thirty days late in the last year or sixty days late in the last two.

Will my lender cancel PMI automatically?

Only at seventy-eight percent, and only on the original amortisation schedule — so extra payments that got you there sooner do not trigger it, because the schedule is what counts rather than the actual balance. Every faster route requires you to ask. Servicers are permitted to notify you when you are approaching the thresholds but are not obliged to seek out the current-value route on your behalf, and for that one they are specifically barred from soliciting you. The onus is yours.

Does paying extra get rid of PMI sooner?

It can, but through a different door than people expect. The automatic seventy-eight percent termination follows the original schedule, so extra payments do not move it. What extra payments do move is the actual balance, which lets you request cancellation at eighty percent of the original value earlier than scheduled — that route explicitly allows either the scheduled date or the date the balance actually reaches the threshold, whichever comes first. A loan recast that drops the ratio to eighty percent generally makes you eligible within a month.

Is PMI different from FHA mortgage insurance?

Fundamentally, and the difference usually matters more than the monthly figures. Conventional insurance is temporary and cancellable by five separate routes. FHA insurance charges an upfront premium as well as a monthly one, and with less than ten percent down it lasts the entire life of the loan — there is no cancellation mechanism at all. The common exit is refinancing into a conventional loan once you have twenty percent equity, which costs closing fees and depends on rates at the time.

Should I wait until I have twenty percent down?

Run the arithmetic before assuming so, because the answer is often no. On the worked example another $48,000 of deposit avoids $9,598 of premiums — the cash costs five times what the insurance does, and it then sits in the house where you cannot reach it. Against that, waiting means paying rent meanwhile and buying at whatever prices apply when you are ready. Insurance is a genuine cost and not good value in isolation; it is simply usually a smaller obstacle than the delay it would take to avoid it.

What is lender-paid mortgage insurance?

An arrangement where the lender pays the premium and charges you a higher interest rate instead. It lowers the monthly outgoing at the start and shows no separate insurance line, which makes it look attractive. The catch is that it cannot be cancelled — the cost is in the rate, so it persists for the whole loan even after you pass eighty percent, when a borrower-paid policy would have stopped. It suits a short expected hold and is expensive over a long one.

What is a piggyback loan and does it avoid PMI?

A structure where a second mortgage covers part of the deposit so the first stays at eighty percent and no insurance is charged — commonly eighty percent first, ten percent second, ten percent cash. Whether it is cheaper depends entirely on the rate on the second, which is usually well above the first and often variable. Compare the combined monthly cost against the insurance it replaces rather than assuming the absence of a premium line means the absence of a cost.

PMI Calculator

There are five ways out of private mortgage insurance, and they split into two families that most calculators treat as one. Three are statutory, under the Homeowners Protection Act. You may request cancellation at eighty percent of the original value, it terminates automatically at seventy-eight, a...

THE LOAN

PURCHASE PRICE ($)

DEPOSIT (%)

RATE (%)

TERM (YRS)

PMI RATE (%/YR)

PREMIUM, AND HOW LONG YOU PAY IT

$223.20

0.62% a year on a $432,000 loan, at 90.0% loan-to-value. The earliest way out is 75% of current value at 3y 7m, by which point you would have paid $9,598.

FIRST OUT

3y 7m

PREMIUMS BY THEN

$9,598

STARTING LTV

90.0%

Appreciation gets you out 4y 4m sooner, worth $11,606. The law alone would keep you paying until 7y 11m, because all three statutory dates use the price you paid. The investor route reads a current valuation instead — but you have to ask for it, pay for the appraisal, and have no payment thirty days late in the past year or sixty days late in the past two. The servicer will not offer.

Waiting for a twenty percent deposit is usually the more expensive option. Another $48,000 of cash would avoid the insurance altogether, against $9,598 of premiums on the fastest route — so the deposit costs roughly 5.0 times what the insurance does, and it is then locked in the house. That does not make PMI good value, but it does make it a smaller obstacle than it looks.

Route	Basis	When	Premiums by then
Request at 80%	price paid	7y 11m	$21,204
Automatic at 78%	price paid	9y 1m	$24,329
Midpoint of the term	price paid	15y	$40,176
75% of current value	value now	3y 7m	$9,598
80% of current value	value now	5y	$13,392

This is an estimate, not a quote. Your actual premium depends on the insurer, your credit score and the loan type, and commonly falls between 0.3% and 1.5% a year. It also assumes a monthly borrower-paid policy — single-premium and lender-paid structures behave quite differently, and lender-paid cannot be cancelled at all because it is built into the rate. FHA mortgage insurance follows separate rules entirely and usually lasts the life of the loan.

THE WAYS OUT

Only one of these five happens without you. The 78% termination is automatic; every other route needs a written request, and the two current-value routes need a valuation you pay for. Servicers are not obliged to remind you, and the one that requires no action is rarely the one that arrives first.

Live calculation · updates as you type

Created with❤️byeaglecalculator.com

HOW TO USE

1
Enter the purchase price and deposit. Anything below twenty percent triggers the insurance, and the page works out what it costs and every route out of it.
2
Set the premium rate if you know it. Quotes commonly land between 0.3% and 1.5% a year, driven mostly by your credit score and the size of the deposit.
3
Open the appreciation field. Only the two investor routes use it — the three statutory dates cannot move, so setting it to zero shows what the law alone gives you.
4
Note which route arrives first. If it is a current-value route, that is a request you have to make yourself, with an appraisal you pay for, and nobody will prompt you.

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Last updated: July 31, 2026 · Statutory routes per the Homeowners Protection Act · Current-value routes per Fannie Mae servicing rules · Estimate only.