Purchase Tips · February 22, 2025
What Is Private Mortgage Insurance and How Do You Eliminate It?
PMI protects the lender but you pay for it. Here is what it costs, when it cancels, and the fastest strategies to eliminate it from your monthly payment.
PMI is required on conventional loans when your down payment is less than 20%. It protects the lender against default — but you pay the premium.
What PMI Costs
PMI typically costs 0.5%-1.5% of your loan amount annually. On a $300,000 loan at 1%: $3,000/year or $250/month. Your rate depends on credit score, LTV, and loan term.
When PMI Cancels
- Automatic cancellation: When loan balance reaches 78% of the original purchase price (federal law requires this)
- Request cancellation: At 80% LTV you can request cancellation in writing
- New appraisal: If home values rose, a new appraisal showing 80% LTV may qualify you for early cancellation
How to Eliminate PMI Faster
Make extra principal payments, request a new appraisal after significant appreciation, or refinance when rates are favorable and equity is sufficient.
FHA MIP vs. Conventional PMI
FHA MIP is more expensive and far less flexible. If you put less than 10% down on a 30-year FHA loan, MIP lasts the life of the loan — it cannot be canceled without refinancing to a conventional loan. This is why building equity and refinancing FHA to conventional is a key long-term strategy for many HMS clients.
Call 309-222-8286.