Payoff Logic

PMI Explained: What It Costs, When It Ends, and How to Kill It Early

By Payoff Logic Editorial Team · Updated

Want your own numbers instead of examples? Open the free mortgage calculator with automatic PMI — no signup, results in seconds.

Direct answer: PMI (private mortgage insurance) is a monthly fee — typically 0.3%–1.5% of the loan per year — charged on conventional mortgages with less than 20% down. It protects the lender, not you. By federal law it cancels automatically once your balance reaches 78% of the home's original value, and you can request removal at 80%. On a $315,000 loan at 0.6%, that's about $158 a month for roughly 9 years if you only make scheduled payments.

What you actually pay

PMI is priced on your loan amount, credit score, and down payment. Example: buy a $350,000 home with 10% down and a 0.6% PMI rate, and you'll pay about $158/month on top of principal and interest. Over the 109 months until automatic cancellation, that's roughly $17,168 of insurance that builds you zero equity. Weak credit can double the rate; strong credit and 15% down can halve it.

The three ways PMI ends

1. Automatic termination (the 78% rule)

Under the federal Homeowners Protection Act, the servicer must cancel PMI on the date your balance is scheduled to hit 78% of the original value — no action needed, as long as you're current on payments. Our calculators model this rule exactly.

2. Borrower-requested cancellation (the 80% rule)

You may request cancellation once the balance reaches 80% of the original value — typically months or years before the automatic date. The catch: you must ask in writing, have a good payment history, and the servicer may require proof the value hasn't fallen.

3. Reappraisal after appreciation or improvements

If your home's current value has risen enough that your loan is at or under 75–80% of it (rules vary by investor and loan age), many servicers will cancel PMI based on a new appraisal you pay for (a few hundred dollars). In fast markets this is often the biggest shortcut of the three.

How to kill PMI faster with math, not luck

  • Extra principal payments pull the 78% date forward. Model it in the extra-payment calculator — the PMI cutoff there reflects your extra payments.
  • A slightly bigger down payment can matter disproportionately: moving from 10% to 12% down cuts both the premium rate tier and the months to 78%.
  • Track your original-value LTV: original value = the lower of purchase price or appraisal at closing. Your payoff progress is in every amortization schedule row.

PMI vs. FHA mortgage insurance — don't confuse them

Conventional PMI cancels. FHA's MIP mostly doesn't: with the common 3.5% down, FHA insurance lasts the life of the loan, and the usual exit is refinancing to a conventional loan at 20% equity. If you're weighing the two programs, compare real numbers in the FHA calculator versus the conventional calculator with PMI.

Is avoiding PMI always worth it?

No — and this surprises people. Draining savings to reach 20% down can leave you without an emergency fund, and in appreciating markets, buying sooner with PMI sometimes beats saving longer while prices climb. PMI is a cost, not a sin; put it in the calculator, look at the total monthly number, and decide with the whole picture in front of you. That's the honest math — and it's what the affordability calculator is for.

Disclaimer: Educational purposes only — not financial advice. Examples are computed with the same verified engines that power our calculators; your numbers will differ. See our Terms of Use.