What Is PMI? Costs, Cancellation Rules, and 4 Ways Out

PMI is private mortgage insurance that protects the lender against loss if you default; it is commonly required on conventional mortgages with less than 20% down. For eligible borrower-paid PMI, you can request cancellation at 80% of the home's original value if you meet the conditions; automatic termination generally uses the scheduled 78% date and requires you to be current on payments.

Quick answer

• Your premium depends on the loan and insurance arrangement. The illustration below assumes $174 a month; it is not a market quote.
• Reaching 80% does not by itself cancel PMI: a qualifying written request and supporting conditions matter.
• Scheduled 78% termination and the midpoint backstop require current payments. Extra principal can advance the 80% request date, not the original scheduled 78% date.
• FHA MIP and lender-paid PMI have different rules. Identify your insurance type before using this timeline.

Find your actual premium before comparing costs

The CFPB's PMI explanation describes monthly, upfront and combined payment arrangements. Monthly mortgage insurance appears in the Projected Payments section on page 1 of the Loan Estimate and Closing Disclosure. PMI does not protect you against foreclosure.

For a simple annual-rate illustration, multiply the insured balance by the annual premium rate and divide by 12. If a policy charges a level annual premium based on an original $360,000 loan at an assumed 0.58%, the result is $2,088 a year, or $174 a month. That shortcut does not establish how your own insurer renews or recalculates premiums; use the quoted payment and policy terms.

Every rate in this table is an assumption for comparing arithmetic, not a quote for a credit score or a claim about typical 2026 pricing. Ask lenders to price the same loan amount, term and down payment so that a lower insurance payment is not masking a higher interest rate or fee.

A $400,000 purchase: when the balance reaches each threshold

Assume the purchase price and appraisal are both $400,000, with $40,000 down and a $360,000 fixed-rate loan for 30 years at an illustrative 6.71%. The monthly principal-and-interest payment is $2,325.39. With the assumed $174 PMI premium, the initial total is $2,499.39 before property taxes, homeowners insurance and other charges.

The model starts with the full loan balance and applies interest monthly, followed by each payment. The extra-payment case adds $200 to principal from payment 1, raising its initial outlay including PMI to $2,699.39. It assumes no missed payments, loan modification, fees or prepayment penalty. The threshold calculations use unrounded balances; an actual servicer's cent rounding may differ.

For this comparison only, a $174 premium is charged through the listed payment and stops before the next one. Assume a timely approved request at 80%, current payments at automatic termination, and no appraisal cost, tax benefit or processing delay. Under those assumptions, requesting cancellation at payment 97 instead of waiting to payment 112 avoids 15 premiums, or $2,610. Adding $200 principal reaches the 80% threshold 32 payments earlier and could avoid $5,568 in premiums compared with the regular-payment request.

These are potential premium differences, not guaranteed refunds or total investment returns. The extra-payment path also commits $13,000 to principal over its first 65 payments. That money becomes home equity; it is not a fee, but it is no longer readily available cash. A household may prefer liquidity or another use for the money. Use the mortgage calculator to compare principal, interest and extra payments; it does not determine PMI cancellation eligibility.

Four routes to ending borrower-paid PMI

1. Request cancellation at 80% of original value

The CFPB cancellation guide covers qualifying single-family principal-residence mortgages closed on or after July 29, 1999. Original value is generally the lower of purchase price and appraisal; after refinancing, it is the refinance appraisal. You may request cancellation on the scheduled 80% date, or earlier after extra payments reach that balance.

The statutory conditions include a written request, good payment history, current payments, and any required evidence of no value decline and certification of no junior lien. Ask the servicer what evidence it accepts before buying an appraisal. Certain high-risk loans have exceptions.

2. Use scheduled termination or the midpoint backstop

Under the ordinary rules, PMI terminates at the scheduled 78% date if payments are current; otherwise it waits until shortly after the borrower becomes current. Extra payments alone do not move that scheduled date. If PMI remains, final termination occurs on the first day of the month after the amortization midpoint, also subject to current payments. For an unchanged 30-year schedule, that is after 15 years, not an unconditional cutoff at payment 180. Agreed loan modifications can change the dates.

3. Ask about cancellation using a higher current value

Investor rules can provide another route. For a Fannie Mae one-unit principal residence or second home, its current-value guidelines generally require LTV at or below 75% when the loan is two to five years old, or 80% when it is older than five years. A qualifying property-improvement exception can waive the two-year minimum with an 80% threshold. Payment history and an approved valuation also matter; other property types have different criteria.

Do not assume an online home-value estimate qualifies or that every loan follows Fannie Mae rules. Ask who owns your loan and what valuation the servicer will order, including its fee, before spending money.

4. Compare refinancing, including its full cost

A new conventional loan may avoid PMI with sufficient equity, but compare closing costs, the new interest rate, remaining balance and repayment term. Removing a $174 premium while increasing principal and interest by $250 raises the monthly outlay by $76 before fees. That hypothetical comparison shows why cancellation alone is not enough reason to refinance.

FHA MIP and lender-paid PMI are different

HUD's MIP duration guidance says FHA case numbers assigned on or after June 3, 2013 generally carry annual MIP for 11 years when original LTV is 90% or less, or for the loan term above 90%. Paying down to 80% does not create the conventional PMI cancellation right.

FHA rates also depend on loan amount, LTV and term. For example, HUD Mortgagee Letter 2023-05 lists 0.55% for an ordinary loan longer than 15 years, with base amount at or below $726,200 and LTV above 95%; it is not a universal FHA rate. The ordinary upfront premium is 1.75%, with specified program exceptions. Confirm the rules for your own case and endorsement dates.

A lender-paid arrangement may instead be reflected in a higher mortgage rate. The conventional 80%/78% borrower-paid cancellation rules do not simply remove that rate. Compare the offers over your expected holding period, including an early sale or full payoff; refinancing is not the only way a loan ends.

Is PMI tax-deductible in 2026?

Public Law 119-21, section 70108 restores qualifying mortgage-insurance treatment as residence interest for tax years beginning after December 31, 2025. This is a potential itemized deduction, not a credit or an automatic refund of your premiums.

Under 26 USC 163(h)(3), qualifying debt, residence and insurance-contract conditions apply. The insurance deduction phases down above $100,000 adjusted gross income, or $50,000 for married filing separately. Our cost examples assume no tax benefit. Check the rules and filing instructions for the tax year involved; a statement about expired deductions on a 2025-return page does not settle 2026 treatment.

What to ask your servicer now

Find the insurance type, original value, current principal and cancellation disclosure in your loan documents. Request the applicable 80% cancellation date, scheduled termination date, payment-history requirements, accepted valuation evidence and any fees. If you seek cancellation, submit the required written request and retain the response. Continue paying the billed amount while it is reviewed; a balance calculation alone does not authorize you to stop paying PMI.