What Is PMI and When Does It Go Away?

What PMI is

PMI is mortgage insurance that a lender may require on a conventional loan when your down payment is less than 20 percent of the purchase price, or when you refinance a conventional loan with less than 20 percent equity. The Consumer Financial Protection Bureau (CFPB) is blunt about whom it serves: PMI protects the lender, not you, if you stop making payments, and you can still lose the home through foreclosure. What it buys you is the loan itself. Without it, many buyers with 3, 5 or 10 percent down would not qualify.

It is a conventional-loan product. FHA loans have their own mortgage insurance premium, VA loans have their own rules, and the cancellation rules below do not apply to either.

What it costs

Freddie Mac puts PMI at about US$30 to US$70 a month for every US$100,000 borrowed, which is roughly 0.4 to 0.8 percent of the loan a year. Freddie Mac says the amount can vary; its own example uses a 0.51 percent rate on a US$190,000 loan, US$80.75 a month. The CFPB describes three ways to pay it:

Monthly premium, the most common: added to the mortgage payment, shown on page 1 of the Loan Estimate under Projected Payments.
Up-front premium, paid once at closing and shown on page 2, section B. If you move or refinance early you might not get any of it back.
Both, an up-front premium plus a smaller monthly one.

Some lenders offer loans with a small down payment and no PMI line, with a higher interest rate instead. The CFPB's advice is to ask lenders for the PMI options and compare the total cost over the time you realistically expect to keep the loan, because the higher rate lasts as long as the loan does and PMI does not. The mortgage calculator includes PMI in the monthly payment and drops it when the balance reaches 78 percent of the price, so you can compare the two offers side by side.

When it goes away: the 80 and 78 percent rules

The CFPB describes the federal requirements for mortgages on single-family principal residences that closed on or after July 29, 1999. They turn on the original value of the home, which is generally the lower of the contract price and the appraisal at purchase, or the appraised value at the time of a refinance.

At 80 percent: you can ask

When the principal balance is scheduled to fall to 80 percent of the original value, you can ask the servicer to cancel PMI. You can ask earlier if extra payments have brought the balance down to that level. The servicer must cancel if you make the request in writing, have a good payment history and are current, certify that there are no junior liens such as a second mortgage, and provide evidence, such as an appraisal, that the value has not declined below the original value.

At 78 percent: it ends automatically

Even if you never ask, the servicer must terminate PMI on the date the balance is scheduled to reach 78 percent of the original value, provided you are current on payments. If you are behind on that date, it ends shortly after you catch up. "Scheduled" means the amortization schedule, not the actual balance, so extra payments do not move this date; for those, use the 80 percent request.

At the midpoint: the final stop

If neither has happened, PMI must end the month after the midpoint of the loan's amortization schedule, 15 years into a 30-year loan, as long as you are current. This matters for loans with interest-only periods, principal forbearance or balloon payments, where the balance falls slowly.

Loans owned by Fannie Mae and Freddie Mac can have their own cancellation rules, but the CFPB notes they cannot be less favorable to you than these. Some servicers also allow removal under their own standards, for example after a new appraisal shows enough equity. That is worth a phone call, because the federal rules alone do not count a rise in value.

How many years that takes

The table assumes a $400,000 home, a 30-year loan at 6.5% and no extra payments. It shows how long the schedule takes to reach the 80 percent request point and the 78 percent automatic cut-off, and what the PMI adds up to until then at Freddie Mac's US$30 and US$70 per US$100,000. The rate is an illustration; a lower rate pays principal down faster and shortens every row.

Down payment	Loan	Starting LTV	80% reached	78% reached	PMI per month	PMI paid until 78%
3%	$388,000	97%	11.1 years	12.0 years	$116 to $272	$16,762 to $39,110
5%	$380,000	95%	10.3 years	11.3 years	$114 to $266	$15,390 to $35,910
10%	$360,000	90%	7.9 years	9.1 years	$108 to $252	$11,772 to $27,468
15%	$340,000	85%	4.7 years	6.3 years	$102 to $238	$7,650 to $17,850

Two things stand out. With 3 percent down, PMI runs for about 12.0 years on the schedule and can cost more than $16,762 in total; with 10 percent down it ends after about 9.1 years. And the gap between the 80 and 78 percent dates is close to a year, so asking at 80 percent saves roughly a year of premiums compared with waiting for the automatic cut-off.

Getting there sooner

Extra principal payments move the actual balance below 80 percent earlier, and you can request cancellation at that point. The mortgage calculator shows how a fixed extra amount per month changes the schedule.
A larger down payment is the only way to avoid PMI altogether on a conventional loan, and the CFPB notes that 20 percent down may also get you a lower interest rate. The savings goal calculator turns the gap between what you have and 20 percent into a monthly target, and the home affordability calculator shows what the smaller loan does to the payment.
A refinance resets the original value to the new appraisal. If the home has gained value, a new loan at 80 percent or less of that value carries no PMI. Closing costs come with it, so the refinance calculator should show a break-even well inside the time you plan to stay.
Waiting is a real option too. If you plan to move within a few years, the rent vs buy calculator counts PMI among the costs you never get back and shows whether buying now beats renting while you save.

FHA mortgage insurance is different

FHA loans do not use PMI. They carry a mortgage insurance premium (MIP) set by HUD. Under Mortgagee Letter 2023-05, effective for case numbers endorsed on or after March 20, 2023, the upfront premium is 1.75 percent of the base loan amount on all mortgages, and the annual premium for a term over 15 years and a base loan amount of US$726,200 or less is 0.50 percent a year up to a loan-to-value ratio of 95 percent and 0.55 percent above that. It runs for 11 years if the starting loan-to-value ratio was 90 percent or less, and for the whole mortgage term if it was higher. Larger loans pay 0.70 or 0.75 percent. So on an FHA loan with less than 10 percent down, the insurance lasts as long as the loan does unless you refinance out of it.

PMI and taxes

Federal law treats premiums for qualified mortgage insurance on a qualified residence as home mortgage interest, with a phase-out above US$100,000 of adjusted gross income (US$50,000 if married filing separately) of 10 percent for every US$1,000 over the line. The provision had expired for amounts paid after 2021; Public Law 119-21 of 2025 removed the expiration for tax years beginning after December 31, 2025. Home mortgage interest can only be deducted if you itemize on Schedule A, so it does not help with the standard deduction. The edition of IRS Publication 936 for 2025 returns still says the mortgage insurance deduction has expired, because the change starts with tax year 2026; check the edition for the year you file.

Frequently asked questions

What does PMI cost per month?

Freddie Mac puts private mortgage insurance at about US$30 to US$70 a month for every US$100,000 borrowed. On a US$380,000 loan that is roughly US$115 to US$265 a month. Freddie Mac notes that the amount can vary. Your own premium is shown on page 1 of the Loan Estimate under Projected Payments.

At what point does PMI go away?

On a conventional loan for a single-family principal residence that closed on or after July 29, 1999, you can ask in writing to cancel PMI when the balance is scheduled to fall to 80 percent of the original value, and the servicer must cancel it automatically when the balance is scheduled to reach 78 percent, as long as you are current. If neither has happened, it ends the month after the midpoint of the amortization schedule, year 15 of a 30-year loan.

Can I cancel PMI early because my home went up in value?

The federal rules the CFPB describes are based on the original value and on the scheduled balance, and require evidence that the value has not declined. Some servicers allow removal under their own standards, and Fannie Mae and Freddie Mac have their own cancellation rules, which cannot be less favorable to you than the federal ones. Ask your servicer what it accepts; a new appraisal is usually part of it.

Is PMI the same as FHA mortgage insurance?

No. FHA loans carry a mortgage insurance premium (MIP) with an upfront part of 1.75 percent of the base loan amount and an annual part that, for most 30-year loans at or under US$726,200, is 0.50 or 0.55 percent a year. MIP lasts 11 years if the loan-to-value ratio was 90 percent or less at the start, and for the whole mortgage term above that. FHA and VA loans do not follow the PMI cancellation rules above.

Is PMI tax deductible?

Under 26 U.S.C. 163(h)(3)(E), as amended by Public Law 119-21 in 2025, premiums for qualified mortgage insurance on a qualified residence are treated as home mortgage interest for tax years beginning after December 31, 2025. The amount phases out by 10 percent for every US$1,000 of adjusted gross income above US$100,000 (US$50,000 if married filing separately). Home mortgage interest is deducted on Schedule A, so it only helps if you itemize. The IRS edition of Publication 936 for 2025 returns still shows the deduction as expired; check the edition for the year you file.

Sources

Written by Tobias Kurth, designer. Updated October 20, 2026.