What Is PMI and How Do I Avoid It? (2026 Guide)

Private mortgage insurance — PMI — is one of the most misunderstood costs of buying a home. Many buyers are surprised to find it on their first mortgage statement, and many existing homeowners do not realise they can stop paying it long before the lender automatically cancels it.

What Is PMI?

PMI is insurance that protects the lender — not you — if you default on your mortgage. Lenders require it when you put down less than 20% on a conventional loan. Despite paying for it every month, you receive zero benefit from PMI. If you default, PMI pays the lender. You still lose your home.

How Much Does PMI Cost?

PMI typically costs 0.5% to 1.5% of your original loan amount per year.

Example: $400,000 home, 10% down, $360,000 loan

• PMI at 0.5%: $1,800/year or $150/month
• PMI at 1.0%: $3,600/year or $300/month
• PMI at 1.5%: $5,400/year or $450/month

Factors that affect your PMI rate: down payment percentage, credit score, loan type, loan term, and property type.

When Does PMI Go Away?

Automatic cancellation at 78% LTV — by law your lender must automatically cancel PMI when your loan balance falls to 78% of the original purchase price. On a 30-year loan at 7% this takes approximately 10-11 years.

Borrower-requested cancellation at 80% LTV — you can request PMI removal earlier by writing to your lender when your balance reaches 80% of the original purchase price. You must be current on payments with a good payment history.

Using current home value — if your home has appreciated, you may already be at 80% LTV based on current value. Your lender will typically require a formal appraisal ($400-600) to use current market value.

How to Avoid PMI Entirely

Put down 20% — simplest solution. On a $400,000 home this means $80,000 down.

Use a piggyback loan (80-10-10) — first mortgage covers 80%, a second mortgage covers 10%, you put 10% down. No PMI on the primary mortgage since it is only 80% LTV. The second loan has a higher rate so run the numbers carefully.

Lender-paid PMI — lender pays PMI in exchange for a slightly higher rate. Makes sense if you plan to sell or refinance within a few years since the higher rate is permanent.

VA loan — no PMI ever regardless of down payment. One of the most valuable benefits of VA loan eligibility.

Professional loans — some lenders offer programs for doctors, dentists, and attorneys with 0-10% down and no PMI.

How to Get Rid of PMI Faster

Make extra principal payments — every extra dollar accelerates your path to 80% LTV.

Request cancellation at 80% LTV — do not wait for automatic cancellation at 78%. Submit a written request as soon as you hit 80%.

Get a new appraisal — if your home has appreciated significantly, a formal appraisal showing current value may push you below 80% LTV now.

Refinance — if rates have dropped and you have enough equity for 80% LTV on the new loan, refinancing eliminates PMI. Factor in closing costs (2-5% of loan amount) to confirm it makes sense.

PMI vs FHA MIP

Conventional PMI — cancels at 78% LTV automatically, can be requested at 80%. Typically lasts 7-11 years with 10% down.

FHA MIP — for loans with less than 10% down originated after June 2013, MIP is required for the entire life of the loan. Never cancels unless you refinance into a conventional loan. This is a significant hidden cost many buyers do not realise.

Calculate Your PMI Cost and Cancellation Date

Get your monthly PMI cost, exact cancellation date, total PMI paid, and how extra payments would accelerate removal. No signup required.