The short version
What PMI is: insurance that protects the lender, paid for by you, on a conventional loan that is larger than 80 percent of the home’s value.
What it costs: an annual premium set as a percentage of the loan amount, split into monthly instalments. The rate depends on your loan-to-value, credit profile, loan term and property type; your lender quotes it with your loan.
How it ends: under the Homeowners Protection Act you can ask for cancellation once the balance reaches 80 percent of the original value, and the servicer must cancel it automatically at 78 percent. Faster routes exist.
What PMI is and when it applies
When a conventional lender makes a loan for more than 80 percent of a home’s value, it takes on more risk than it is willing to hold alone. Private mortgage insurance transfers part of that risk to an insurer. If the loan defaults and the lender loses money in foreclosure, the insurer pays the lender a share of the loss. The borrower pays the premium, and receives no coverage — the policy protects the lender, full stop.
Fannie Mae and Freddie Mac, which buy most conventional loans, require mortgage insurance on any loan above 80 percent loan-to-value, and they specify how much coverage the insurer must provide at each LTV band. That coverage requirement, rather than anything about you personally, is the starting point for the premium.
The 80 percent line is not arbitrary. It is written into the Homeowners Protection Act of 1998, the federal law that governs when PMI must be cancelled, and it is the reason the value of your home — not just your balance — matters so much to how long you pay.
PMI calculator
Estimate your PMI and when it can end
Example figures are pre-filled — replace them with your own. Enter the annual PMI rate your lender quoted as a percentage of the loan amount. The calculator assumes a fixed-rate loan with scheduled payments only and uses the purchase price as the original value.
Estimate only. Your actual premium is set by the mortgage insurer based on the full loan file, and the cancellation dates on your PMI disclosure form control. Extra principal payments, a recast or a rise in the home’s value can bring cancellation forward; the timeline above assumes scheduled payments only. Not a quote or a commitment to lend.
What drives the premium
Mortgage insurers price from rate cards that look at the whole loan, not just the size of the down payment. The factors that move the number, roughly in order of weight:
- Loan-to-value. The higher the LTV, the more coverage Fannie Mae and Freddie Mac require and the higher the premium. Each band down toward 80 percent costs less.
- Credit profile. Insurers tier their rates by credit profile. We do not publish their thresholds — they belong to the insurers and shift over time — but a stronger profile pays a noticeably lower premium at the same LTV.
- Loan term and type. Shorter fixed terms are cheaper to insure than 30-year loans; adjustable-rate loans usually cost more than fixed.
- Debt-to-income ratio. Files above the insurers’ DTI breakpoints carry a surcharge.
- Occupancy and property type. Second homes, investment properties, condos, manufactured homes and two-to-four-unit properties can all carry adjustments.
- Number of borrowers. Two borrowers on the note typically price a little better than one.
- Coverage amount. A lender can sometimes choose lower coverage in exchange for a pricing adjustment on the loan itself; that trades one cost for another.
Because every one of those inputs comes from your specific file, the only reliable PMI figure is the one on your Loan Estimate. Anything you read as a typical range is a national average that may have nothing to do with your loan.
Four ways to pay it
| Structure | How it works | Can it be cancelled? |
|---|---|---|
| Borrower-paid monthly | The annual premium is divided into monthly instalments added to your payment. The default on most conventional loans. | Yes — the Homeowners Protection Act rules below apply. |
| Single premium | The whole premium is paid at closing, by you or through a seller credit, and the monthly payment carries no PMI. | Not refundable in most cases once paid; if you sell or refinance early, the unused premium is usually gone. |
| Split premium | Part paid at closing, the rest monthly at a reduced rate. | The monthly portion cancels under the same rules; the upfront portion is spent. |
| Lender-paid (LPMI) | The lender pays the insurer and charges you a higher interest rate instead of a separate premium. | No. The cost lives in the rate for the life of the loan; the only way out is a refinance. |
Monthly borrower-paid PMI is the structure most people should default to, because it is the only one that goes away on its own. Single-premium and lender-paid structures can make sense for a borrower who is certain to keep the loan a long time, but they turn a temporary cost into a permanent one.
PMI versus FHA mortgage insurance
FHA loans do not carry PMI. They carry a mortgage insurance premium (MIP) set by HUD, and the two are different in almost every way that matters:
| Conventional PMI | FHA MIP | |
|---|---|---|
| Who sets the price | Private mortgage insurers, from risk-based rate cards | HUD, by published schedule; the same for every borrower at a given loan size, LTV and term |
| Structure | Annual premium paid monthly (or single, split, lender-paid) | An upfront premium, usually financed into the loan, plus an annual premium paid monthly |
| Effect of a stronger credit profile | Lower premium | No change — the schedule ignores credit |
| When it ends | Cancellable at 80 percent of original value; automatic at 78 percent (HPA) | For loans originated since June 2013: the life of the loan, unless the loan began at or below 90 percent LTV, in which case 11 years (HUD Mortgagee Letter 2013-04) |
| Way out | Reach the threshold, or refinance | Refinance into a conventional loan once you have the equity |
| Tax treatment | Both are treated as deductible mortgage interest from the 2026 tax year, subject to the income phase-out | |
For a borrower with a strong credit profile and a modest down payment, conventional PMI is frequently the cheaper insurance and is always the more temporary one. For a borrower whose profile prices poorly on the private rate cards, FHA’s flat schedule can win. It is a file-by-file comparison, and it is exactly what a pre-approval conversation is for.
How to get rid of PMI
Federal law gives you rights here, and the investor guidelines add a faster route. In order:
1. Request cancellation at 80 percent
Under the Homeowners Protection Act, you can ask your servicer in writing to cancel PMI on the date the balance is first scheduled to reach 80 percent of the original value — or earlier if extra payments actually get it there. That date is on the PMI disclosure you received at closing. The servicer can require that you be current, that you have a good payment history, that there be no second mortgage on the home, and that the value has not fallen, which may mean an appraisal at your expense.
2. Automatic termination at 78 percent
If you never ask, the servicer must terminate PMI on the date the balance is scheduled to reach 78 percent of the original value, as long as you are current. If you are behind at that point, it terminates once you catch up. There is a backstop, too: PMI ends at the midpoint of the loan term regardless of the balance, provided you are current.
3. Cancellation based on the home’s current value
The law works from the original value. Fannie Mae and Freddie Mac allow a request based on the current value once the loan has some age. Under the Fannie Mae Servicing Guide, a loan between two and five years old qualifies if the balance is at or below 75 percent of a new valuation; after five years, 80 percent. Substantial improvements you have made can support an earlier request. In a market where values have risen, this route often gets there years before the scheduled date, and it is one many homeowners never ask about.
4. Pay the balance down, or recast
Extra principal payments move the scheduled date forward. A lump sum followed by a mortgage recast lowers the payment as well — but note that a recast does not cancel PMI by itself. You still make the request under the rules above once the balance qualifies.
5. Refinance
If the home has gained enough value that a new loan would be at or below 80 percent LTV, a refinance removes PMI outright. Whether that is worth doing depends on where rates are relative to your current loan and on closing costs, which is a conversation with an MLO rather than a rule.
If a servicer refuses a request that meets the legal tests, the Consumer Financial Protection Bureau accepts complaints and requires a response.
Is it worth paying PMI to buy sooner?
Often, yes. PMI is a temporary cost with a defined exit. Waiting to save a larger down payment has costs of its own: rent paid in the meantime, and prices and rates that may move against you. The question is not whether PMI is desirable — nobody likes it — but whether the monthly premium is smaller than what waiting would cost, and for how long you would pay it.
In Florida, PMI is rarely the line that decides affordability. Homeowners insurance, flood insurance where it applies, and for condos the association dues and any special assessments usually move the monthly number far more than mortgage insurance does. Run the whole budget, not just the premium.
PMI and your taxes
From the 2026 tax year, qualified mortgage insurance premiums are treated as deductible mortgage interest for homeowners who itemize, subject to an income phase-out that starts at $100,000 of adjusted gross income. The premiums appear in Box 5 of Form 1098. Our guide to the mortgage interest tax deduction explains the itemizing math that decides whether the deduction helps you. Cancelling PMI is worth more than deducting it; do both if you can.
Frequently asked questions
Is PMI the same thing as FHA mortgage insurance?
No. PMI is private insurance on a conventional loan, and federal law gives you the right to cancel it once you reach the equity thresholds. FHA loans carry a government mortgage insurance premium set by HUD, with an upfront charge plus an annual premium, and on most FHA loans made since June 2013, under HUD's rules, the annual premium stays for the life of the loan unless the loan started at or below 90 percent loan-to-value.
Does PMI protect me if I cannot pay?
No. PMI protects the lender against loss if the loan defaults. You pay the premium because the lender is taking more risk on a loan above 80 percent of the home’s value; the policy pays the lender, not you.
How can I avoid PMI without a large down payment?
The common routes are a second mortgage that keeps the first loan at or below 80 percent of the value, a lender-paid structure where the cost is built into the interest rate instead of a separate premium, or certain lender and state programs that waive it. Each has trade-offs; an MLO can lay them out side by side.
How long do I pay PMI?
Until your balance reaches 80 percent of the home’s original value and you ask for cancellation, or 78 percent when the servicer must cancel it automatically, provided you are current on payments. Extra principal payments, a rise in the home’s value or a recast can get you there sooner.
Does PMI go away on its own?
On a conventional loan, yes. Under the Homeowners Protection Act the servicer must terminate borrower-paid PMI when the balance is first scheduled to reach 78 percent of the original value, as long as you are current, and no later than the midpoint of the loan term. You do not have to wait for that; you can request cancellation at 80 percent.
Is PMI tax deductible?
Starting with the 2026 tax year, qualified mortgage insurance premiums are treated as deductible mortgage interest if you itemize, with a phase-out above $100,000 of adjusted gross income. See our mortgage interest tax deduction guide for the details.
Want a loan structured with PMI in mind?
A MortgageQuote.com MLO can show you how different structures — monthly, single-premium, lender-paid, or a smaller first mortgage — change the total you pay, using your own numbers.
Get pre-approved Ask an MLOAbout this page
MortgageQuote.com is the consumer brand of New Century Financial Mortgage, LLC, a Florida mortgage brokerage. We publish this guide because PMI is quoted on almost every conventional purchase we broker, and because the cancellation rights under federal law are the part borrowers most often do not know they have.
Sources
- Consumer Financial Protection Bureau — When can I remove private mortgage insurance (PMI) from my loan?
- United States Code — 12 U.S.C. § 4902, Termination of private mortgage insurance (Homeowners Protection Act of 1998)
- Fannie Mae Servicing Guide — B-8.1-04, Termination of Conventional Mortgage Insurance
- U.S. Department of Housing and Urban Development — Mortgagee Letter 2013-04, duration of the FHA annual mortgage insurance premium
- Internal Revenue Service — Publication 936, Home Mortgage Interest Deduction
- Congress.gov — H.R. 1, One Big Beautiful Bill Act, Public Law 119-21 (Section 70108, mortgage insurance premiums treated as interest from tax year 2026)
This article and calculator are provided for general informational purposes. They are not tax, legal or financial advice, and nothing here is a commitment to lend, a loan approval or an offer of any specific rate, premium or term. Mortgage insurance premiums are set by the insurer for each loan; the cancellation thresholds described are those of the Homeowners Protection Act and the Fannie Mae Servicing Guide as cited above and may be applied differently by your servicer. All loans are subject to credit approval and underwriting review.
