PMI, private mortgage insurance, is a policy that protects the lender if a conventional loan with less than 20% down goes into default. You pay for it, but it does not protect you. The good news is that on a conventional loan it is temporary: federal law lets you request removal once your balance reaches 80% of the home's original value and requires it to end automatically at 78%, if you are current on your payments.
Who pays PMI
PMI applies to conventional loans with less than 20% down, or refinances with less than 20% equity. It does not apply to:
- FHA, which has its own mortgage insurance premium with different and stricter rules. See How Long FHA Mortgage Insurance Lasts.
- VA, which has no monthly mortgage insurance at all.
- Physician loans from many lenders, which waive it. See the Physician Loan Guide.
What PMI costs
PMI is priced as an annual percentage of the loan, paid monthly. The premium depends mostly on your credit score and your down payment. A higher score and a larger down payment both lower it, sometimes dramatically. Two borrowers buying the same house can pay very different premiums, which is why a score improvement before you lock can pay twice: once on the rate and again on the insurance.
There are also alternatives to monthly PMI, such as single-premium or lender-paid structures, where the cost is paid upfront or built into the rate. They make sense in some situations and not others. Ask to see the comparison.
The federal removal rules
The Homeowners Protection Act sets the floor for most conventional loans on a primary residence:
- Borrower-requested cancellation: when the principal balance is scheduled to reach, or you pay it down to, 80% of the original value, you can ask in writing to cancel. Expect to need a good payment history, and the servicer may require evidence that the value has not declined and that there are no other liens.
- Automatic termination: PMI must end when the balance is scheduled to reach 78% of the original value, as long as you are current.
- Final termination: at the midpoint of the loan term, even if neither threshold has been reached, if you are current.
"Original value" generally means the lower of the purchase price or the appraised value at closing. Your servicer can tell you the scheduled date, and you can ask for it at any time.
Three ways to get rid of it faster
1. Pay extra principal. Extra payments move you to 80% sooner. Then request cancellation in writing.
2. Use appreciation. If your home has risen in value, many servicers will consider removing PMI based on a new appraisal, under investor rules that usually require a minimum time since closing and a lower loan-to-value the sooner you ask. This is not the same as the federal 80% rule and the requirements vary, so call your servicer and ask exactly what they require before ordering an appraisal.
3. Refinance into a new loan without PMI if your equity has passed 20%. Only worth it if the overall numbers make sense; refinancing to drop a modest premium into a higher rate is a bad trade. See When Should I Refinance?.
Should you avoid PMI by waiting to save 20%?
Usually not. PMI is a cost, but so is waiting: rent paid, appreciation missed, and years of principal you did not pay down. For many buyers the right move is to buy with less down, keep reserves in the bank, and remove PMI later. Run the numbers on both paths with your actual score and price.
Why ask me
- I answer the question before I sell you anything. If renting, waiting or a different program is the better move, I will say so.
- Real numbers, not a calculator guess. I price your actual scenario, side by side, with the fees on the page.
- Every program under one roof. Conventional, FHA, VA, jumbo, and non-QM options like bank statement, DSCR and asset-based loans, so the program fits you instead of the other way around.
- You talk to the principal. Ricky Khamis is President of EPiQ Lending, NMLS #173141, lending in Arizona since 1999 and a 2025 Presidents Club Winner at CMG Home Loans. Direct line: (480) 999-9842.
EPiQ Lending is NMLS #1936984, at 7975 N. Hayden Road, Suite A-101 in Scottsdale. Verify all of it before you trust any of it: Ricky's EPiQ Lending profile, the Scottsdale branch, and the license itself at NMLS Consumer Access. Hold every lender to that standard, including us.
More plain-English answers in the Mortgage Education library.
Equal Housing Opportunity. This is general information, not a commitment to lend or an offer to extend credit. Program guidelines, eligibility requirements and documentation standards vary by investor and change over time. Rates, terms and program guidelines change and depend on credit approval, property appraisal and other qualifying factors. Not all applicants will qualify. This is not legal or tax advice; consult a qualified professional about your own situation.
Find out which program actually costs you less
FHA, conventional and jumbo price the same borrower very differently once the mortgage insurance is compared across the years you will own the home. Tell me the shape of your file and I will run them side by side.
Looking at a specific home? Send me the address and I will run the numbers: rickykhamis.com/analyze
