What is PMI, and how do you get rid of it?

In depth

Why PMI exists

When you put down less than 20% on a conventional loan, the lender is taking on more risk — there’s less of your own money cushioning the loan. Private mortgage insurance offsets that risk. It’s a policy that protects the lender if the loan defaults, and it’s what makes low-down-payment conventional lending possible in the first place. Without it, many buyers would be forced to wait years longer to save a full 20%.

It’s worth being clear about who PMI protects: it protects the lender, not the borrower. You pay for it, but it doesn’t cover you if you run into trouble. That can feel unfair at first glance — but the trade-off is real, because PMI is precisely what lets you buy sooner with a smaller down payment. For many buyers, paying PMI for a while is far better than delaying homeownership.

How PMI compares to FHA insurance

PMI is specific to conventional loans, and its defining advantage is that it’s not permanent. As you pay down your loan and build equity, PMI can be removed — which is a meaningful long-term difference from FHA loans, whose mortgage insurance often lasts the life of the loan unless you refinance out of it.

This distinction is a big part of the FHA-versus-conventional decision. A buyer with stronger credit and a reasonable down payment often finds conventional more cost-effective over time precisely because conventional PMI eventually goes away, while FHA insurance may not. Which is better depends on your specific numbers, but the removability of PMI is one of conventional lending’s quiet advantages.

The removal rules

Conventional PMI can generally be cancelled on request once your loan balance falls to a certain percentage of the home’s original value, and lenders are required to automatically terminate it at a further threshold, provided you’re current on payments. Rising home values or extra principal payments can help you reach these points sooner. The exact rules depend on the loan, so it’s worth asking your servicer about the specifics for your mortgage.

Should PMI stop you from buying?

For most buyers, the answer is no. PMI is a manageable, temporary cost that unlocks the ability to buy sooner rather than waiting years to save a larger down payment — and during those years, home prices and rents may rise anyway. The smarter frame is usually to weigh the cost of PMI against the cost of waiting, not to treat PMI as a reason to delay.

There are also ways to structure around it depending on your situation, and a broker can compare options — conventional with PMI, FHA, or other structures — to find what serves you best. If you’re weighing a smaller down payment, a short conversation will lay out the real trade-offs, with no obligation.

It also helps to keep PMI in perspective relative to the alternative. Renting while you save a full 20% has its own cost, and in a market where prices and rents tend to rise, waiting can quietly cost more than the PMI would have. Viewed that way, PMI is less a penalty than the price of getting into a home — and building equity — years sooner, with a clear path to removing it as that equity grows.