What is PMI, and when can it be removed?

How it works

PMI may be paid monthly, upfront, or through another arrangement. Cancellation rules depend on the loan and applicable conditions. For many covered conventional loans, a borrower can request cancellation at 80% of original value and automatic termination generally occurs at 78% under required conditions. FHA mortgage insurance follows different rules.

A worked example

For a home originally valued at $300,000, 80% is $240,000 and 78% is $234,000. These figures help identify milestones but do not by themselves establish immediate cancellation eligibility. Payment status, scheduled amortization, borrower requests, and other applicable requirements matter. A new market estimate is not automatically the “original value” used in these rules.

What to compare

Ask the servicer for the written cancellation requirements and the relevant dates. Compare a larger down payment with keeping a stronger reserve; avoiding PMI at any cost can leave too little cash for repairs. Obtain actual PMI quotes because the cost depends on the loan and borrower circumstances, not one fixed percentage for everyone.

A common mistake to avoid

Do not assume all mortgage insurance disappears when your own estimate of equity reaches 20%. Some products have different rules, and appreciation-based cancellation may require a separate process. Keep proof of the request and review the servicer’s response. Read the official guidance for your loan type before relying on a payoff milestone.

Does PMI protect me if I miss payments?

It primarily protects the lender. It does not make the borrower’s required payments optional or replace coverage for damage to the home.

Sources and further reading

• CFPB: Removing private mortgage insurance
• CFPB: All the costs of buying a home

Connect this to inflation

Inflation changes the spending power of money over time. Read the related inflation explainer, or compare dollars across years using your own assumptions.