If you’re planning to buy a home—or if you already have a mortgage—you may have heard the term PMI. Many buyers aren’t sure what PMI is, why they’re paying it, or how to get rid of it. In this guide, I’ll explain everything you need to know about Private Mortgage Insurance, including how it works, how much it costs, and the exact steps to remove it when eligible.
What Is PMI?
Private Mortgage Insurance (PMI) is a type of insurance required on most conventional loans when the buyer puts down less than 20% on a home purchase. PMI protects the lender—not the borrower—in case of default, but it does allow buyers to purchase a home without waiting to save a full 20% down payment.
PMI is not required for:
- VA loans (zero PMI)
- USDA loans (they use a different fee structure)
- FHA loans (they use MIP instead of PMI)
How Much Does PMI Cost?
PMI is based on several factors, including your credit score, loan amount, down payment, and loan type. Premiums usually range between:
0.3% to 1.5% of the loan amount annually
Example:
- Loan Amount: $400,000
- PMI Rate: 0.70%
Annual PMI Cost: $400,000 × 0.007 = $2,800
Monthly PMI Cost: $2,800 ÷ 12 = $233.33/mo
When Does PMI Apply?
You’ll typically pay PMI when:
- Your down payment is less than 20%
- You’re using a conventional mortgage
- Your lender requires risk-based pricing due to credit or debt-to-income factors
PMI automatically ends once certain equity thresholds are reached—but you may be able to remove it sooner by request.
How to Remove PMI: 3 Paths
There are several ways to eliminate PMI depending on your loan terms and how quickly your home value grows.
1. PMI Automatically Ends at 78% LTV
By federal law under the Homeowners Protection Act:
- Your PMI must automatically cancel once your loan reaches 78% loan-to-value (LTV) based on your original purchase price.
- This happens through normal amortization as you make payments.
You don’t need to request this—your lender must remove it.
2. Request PMI Removal at 80% LTV
You can request PMI removal early once you reach 80% LTV. This can happen faster if:
- You’ve made extra principal payments
- Your home has appreciated in value
- Your loan balance has dropped faster than scheduled
Your lender will typically require:
- A clean payment history
- An updated property valuation (BPO or appraisal)
- Verification you still occupy the home (for certain programs)
3. Refinance to Remove PMI
If your property value has increased significantly, refinancing into a new loan without PMI may be the fastest option. Home appreciation can push you below the 80% threshold even if you didn’t put down 20% initially.
Refinancing removes PMI immediately if your new loan meets the 80% LTV requirement.
PMI vs MIP: What’s the Difference?
Some borrowers confuse PMI with MIP (Mortgage Insurance Premium).
PMI → Conventional loans
MIP → FHA loans
Unlike PMI, FHA’s MIP may last for the life of the loan unless you put down 10% or refinance into a conventional loan.
Can I Remove FHA Mortgage Insurance (MIP)?
Yes—but the process is different:
- If you put down 10% or more: MIP lasts for 11 years
- If you put down less than 10%: MIP lasts for the life of the loan
The fastest way to remove FHA MIP is to refinance into a conventional loan once you reach 20% equity.
How Rising Home Values Help You Remove PMI Faster
In many markets—especially throughout Texas—home values have risen enough that homeowners reach 20% equity far sooner than expected. Even a modest 5–10% increase in value can eliminate PMI early.
An updated valuation or appraisal may be all you need to remove PMI.
Ready to Find Out If You Can Remove PMI?
If you’re unsure whether you qualify for PMI removal or if refinancing might save you money, I can prepare a personalized analysis. Removing PMI can often save homeowners $150–$400 per month depending on loan size.
Apply Online:
https://wayne-wallace.com/apply
Schedule a Call:
Schedule a 30-Minute Consultation
I’ll help you review your equity, payment history, loan program, and options to eliminate PMI as quickly as possible.
This content is for educational purposes only and does not constitute a commitment to lend. All loans are subject to underwriting and eligibility requirements. Homewood Mortgage, LLC — NMLS #294974. Wayne Wallace — NMLS #745186.