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PMI explained

Private mortgage insurance protects the lender, not you, when you buy with less than a fifth of the price down. It adds to the monthly payment for years, but federal law sets firm rules for when it ends, and you can usually end it sooner.

Updated . Figures computed from our mortgage formulas and dated data.

PMI applies to conventional loans when the loan is more than 80% of the home’s price, in other words when the down payment is under 20%. It is priced as a yearly percentage of the loan, charged monthly. The rate depends mostly on your credit score and the size of the down payment; the examples here assume 0.5% a year, which you can change in our calculators to match a real quote.

All examples use a $400,000 home in Colorado and a 30-year fixed loan at 7.4%, the Freddie Mac weekly average as of October 15, 2026, for illustration.

What it costs at different down payments

  • $20,000 down: PMI of $158.33 a month, lasting 12 years and 3 months on the original schedule, $23,275 in all.
  • $40,000 down: $150.00 a month for 10 years, $18,000 in all.
  • $60,000 down: $141.67 a month for 7 years, $11,900 in all.
  • $80,000 down: no PMI, and a total payment of $2,501.42 a month including tax and insurance.

The monthly charge changes less than you might expect between these down payments, because it is a percentage of a loan that only shrinks a little. What changes a lot is how long you pay it. A bigger down payment starts you closer to the line where it ends.

With $40,000 down, the loan is $360,000. The monthly payment is $2,492.57 of principal and interest plus tax, insurance and PMI, $2,928.37 in all.

When it ends: the two lines

The Homeowners Protection Act sets two points, both measured against the home’s original value, normally the purchase price:

  • At 80% you can ask the lender in writing to cancel PMI. On this home that is a balance of $320,000. You must be current on payments, have a good payment history, and the lender can ask for evidence that the home has not lost value and that there is no second mortgage.
  • At 78% the lender must end it automatically, as long as you are current. That is a balance of $312,000.
When PMI can be canceled and when it ends, on a loan with ten percent down The loan balance falls from $360,000 toward zero over thirty years. It reaches $320,000, 80% of the original price, after 8 years and 9 months, and $312,000, 78%, after 10 years. 80% of price: request cancellation. 78%: PMI ends automatically. PMI ends: 10 years $0 $180k $360k Year 0Year 10Year 20Year 30 Years into the loan 80% of price: request cancellation 78%: PMI ends automatically PMI ends: 10 years
Scheduled balance of a $360,000 loan on a $400,000 home at 7.4%. You can ask the lender to cancel PMI at the upper dashed line; it must end by the lower one.

On the original schedule with $40,000 down, the request line arrives after 8 years and 9 months and automatic termination after 10 years. Calendar reminders for both dates are worth setting on the day you close. Lenders do not have to remind you of the first one.

There is also a backstop: PMI must end at the midpoint of the loan’s term, halfway through, even if the balance has not reached the automatic line, which matters mainly for interest-only and other unusual loans.

Ending it sooner with extra payments

The request line is about the balance, not the date, so extra principal payments bring it forward. Adding $200.00 a month to the $40,000-down loan reaches the 80% line after 5 years and 9 months instead of 8 years and 9 months. That saves $5,400 of PMI on top of the interest the extra payments save. Note that automatic termination follows the original schedule, so with prepayments you need to make the request yourself; our extra payment calculator shows the new date.

Ending it with a higher value

If your home has risen in value, the loan may already be under 80% of what it is worth now, even though it is not yet under 80% of the purchase price. Many lenders, following Fannie Mae and Freddie Mac rules, will cancel PMI based on a new appraisal, usually after you have held the loan for two years or more and often at a lower loan-to-value threshold in the early years. You pay for the appraisal, so check recent sales nearby first. The act does not require lenders to do this, so ask for the servicer’s written policy.

PMI is not the only mortgage insurance

FHA loans charge an upfront mortgage insurance premium and an annual premium. With less than ten percent down, the annual premium lasts for the life of the loan; the usual way out is to refinance into a conventional loan once you have enough equity. Our refinance guide covers whether that pays.

VA loans have no monthly mortgage insurance, only a one-time funding fee that many veterans are exempt from. USDA loans have an annual fee for the life of the loan.

Lender-paid PMI builds the cost into a higher interest rate instead of a separate charge. It never comes off, because it is part of the rate. It can make sense if you expect to sell or refinance within a few years, and rarely otherwise.

Is it worth paying PMI to buy sooner

Waiting to save a full 20% down payment can take years, during which you pay rent and home prices may rise. On the $40,000-down example, the full PMI cost of $18,000 is spread over 10 years. Compare that with a few years’ rent and the price trend in your area, using the rent vs buy calculator, before deciding PMI is something to avoid at all costs.

From the 2026 tax year, mortgage insurance premiums can again be deducted as mortgage interest, but only if you itemize, and the deduction phases out at higher incomes. Most buyers take the standard deduction, so for them there is no tax offset to count.

Calculators for this guide

Sources

Every figure on this page is computed by the same code as our calculators. How we calculate.