PMI: What You Are Paying For and How to Stop
Private mortgage insurance protects the lender with your money — but it is also the fee that lets you buy with less than 20% down. How PMI is priced, the three ways it ends, and the equity check worth doing once a year.
Published · Home & Mortgage · 2 min read
Private mortgage insurance has a public-relations problem: you pay the premium, the lender collects the protection. But the fairer framing is that PMI is the price of borrowing with a thin equity cushion — the fee that opens homeownership years earlier than a 20% down payment would. The goal is not to resent it; it is to pay it deliberately and end it early.
How it is priced
Conventional-loan PMI typically runs from about 0.2% to 1.5% of the loan balance per year, folded into the monthly payment. The rate depends on your down payment tier, credit score, and loan type — a strong-credit borrower at 10% down sits near the bottom of the range; a 3% down, fair-credit borrower near the top. On a $350,000 loan, that is a spread from roughly $60 to over $400 a month, which is why quoting your own number matters more than any rule of thumb. (FHA loans carry a different, generally stickier premium structure that often persists for the life of the loan — one of the main reasons FHA borrowers eventually refinance into conventional.)
The three exits
- Request at 20% equity. Once your balance falls to 80% of the home's original value, you may request cancellation in writing — good payment history required.
- Automatic at 22%. The servicer must drop PMI when scheduled amortization brings the balance to 78% of original value — the do-nothing backstop, years later than the request line.
- Appreciation and a new appraisal. If the home's current value has risen enough that your balance is under 80% of it, many servicers will cancel with a paid appraisal — routinely the fastest exit in rising markets, and the one people forget to claim.
The annual five-minute check
Once a year, estimate your home's value against your loan balance. When the ratio approaches 80%, compare the appraisal cost (a few hundred dollars) against your monthly PMI — the payback period is often two or three months. Extra principal payments accelerate the date too; whether that beats other uses of the money is exactly what the PMI calculator and the home equity calculator are for. PMI is temporary by design — but only for owners who do the checking.
Run your own numbers
More on home & mortgage
- Mortgage Points: Prepaying Interest and the Break-Even That Decides It
- The 20% Down Payment: Where the Rule Came From and When to Break It
- Rent vs. Buy: The Honest Version of the Math
This article is general education, not tax, legal, investment, or financial advice. Figures used in examples are illustrations, not quotes or predictions. For decisions that depend on your full situation, talk to a qualified professional.