What Is PMI (Private Mortgage Insurance) and How to Get Rid of It

Private Mortgage Insurance (PMI) is one of the most misunderstood — and resented — parts of homeownership. It typically costs 0.5–1.5% of your loan amount per year, adding $83–$250/month to a $200,000 mortgage. Here's everything you need to know.

What Is PMI and Why Do Lenders Require It?

PMI protects the lender (not you) if you default on the loan. It's required when your down payment is less than 20% of the home's purchase price. Once you have at least 20% equity, you typically have the right to cancel it.

How Much Does PMI Cost?

• Typically 0.5%–1.5% of the loan amount per year
• On a $300,000 loan: $125–$375/month
• Cost depends on down payment size, credit score, and loan type
• Usually paid monthly as part of your mortgage payment

How to Get Rid of PMI

1. 1Wait until you reach 20% equity automatically (lender must cancel at 22%)
2. 2Request cancellation in writing when you hit 20% equity based on original purchase price
3. 3Get a new appraisal if home value has increased (may reach 20% equity faster)
4. 4Refinance into a new loan once you have 20% equity
5. 5Make extra principal payments to build equity faster

Is PMI Always Bad?

Not necessarily. In a rising market, buying with 5% down and paying PMI for 2 years while your home appreciates can be smarter than waiting 4 years to save 20%. Run the numbers for your specific market — sometimes PMI is the right trade-off.