Private Mortgage Insurance (PMI) is typically required on conventional loans when a down payment is less than 20% (over 80% Loan-to-Value or LTV). It protects lenders if borrowers default. PMI can be removed by submitting a request once equity hits 20% (80% LTV) and automatically terminates at 78% LTV, or mid-loan, usually after 2 years.
Buying a home with less than 20% down is one of the most common paths to homeownership, and for most buyers it comes with one added monthly cost: private mortgage insurance, or PMI. It is temporary, it is governed by federal law, and there are clear paths to removing it.
At Sprint Funding, we walk borrowers through the PMI conversation on a regular basis, and the first thing we tell them is this: you have rights. If you want to understand exactly where you stand, contact us today for a free consultation with a licensed mortgage advisor.
What Is Private Mortgage Insurance (PMI)?
PMI is insurance that protects the lender, not the homeowner, if the borrower defaults on a conventional mortgage. When your down payment is below 20%, your loan-to-value (LTV) ratio exceeds 80%, and the lender’s risk increases. PMI offsets that risk.
According to Freddie Mac, PMI typically costs between $30 and $70 per month for every $100,000 borrowed. On a $400,000 loan, that means $120 to $280 added to your monthly payment. Annually, premiums range from 0.46% to 1.5% of the loan amount depending on your credit score and LTV ratio, according to the Urban Institute. That is a real cost with a real expiration date, and knowing the rules is how you get there faster.
PMI applies to conventional loans only. FHA loans carry a separate charge called mortgage insurance premium (MIP), which follows different federal guidelines and, for most FHA loans originated after June 2013 with less than 10% down, remains in place for the full loan term.
When Is PMI Required on a Mortgage?
PMI is required on a conventional mortgage when the down payment is less than 20% of the purchase price or appraised value, whichever is lower. Your LTV ratio determines both whether PMI applies and when you can remove it.
Three situations where PMI commonly applies:
- First-time buyers: The median down payment for first-time buyers was 10% in 2025, according to the National Association of Realtors’ 2025 Profile of Home Buyers and Sellers. That means most first-time buyers are carrying PMI from closing day.
- Move-up buyers: If sale proceeds from your previous home don’t cover a full 20% on the new purchase, PMI applies again on the replacement mortgage.
- Refinancing: If your current equity is below 20% of the new appraised value at the time of refinancing, PMI is required on the new loan.
How Do You Remove PMI? Three Legal Paths
The Homeowners Protection Act of 1998 (12 U.S.C. § 4901), enforced by the CFPB, establishes three distinct ways to remove PMI from a conventional loan. Which path applies depends on your LTV ratio, payment history, and how long you have held the loan.
1. Request Cancellation at 80% LTV
You have the right to submit a written cancellation request to your servicer once your principal balance reaches 80% of the home’s original value (the lower of purchase price or appraised value at closing). This is the fastest path for borrowers who are proactively paying down their balance.
To qualify, servicers typically require that you are current on payments, have no 30-day late payments in the past 12 months, have no 60-day late payments in the past 24 months, and can demonstrate that the property value has not declined since closing. An interior property valuation is often ordered to confirm. One thing many borrowers miss: the written request is a legal requirement. A phone call alone does not trigger cancellation.
2. Automatic Termination at 78% LTV
If you do not request cancellation, your servicer must automatically terminate PMI on the date your principal balance is first scheduled to reach 78% of the original home value, based on your amortization schedule, provided you are current on payments. This calculation uses the original value only, not current market value.
A separate federal backstop applies as well. On a 30-year loan, PMI must be terminated at the loan’s midpoint (year 15), even if the balance has not yet reached 78%. This provision most often applies to loans with interest-only periods, principal forbearance, or balloon structures.
3. Early Removal Through a New Appraisal
If your home has appreciated through market gains or renovations, you may qualify for PMI removal before your amortization schedule would otherwise allow. The LTV thresholds for appraisal-based removal are:
- Loan two to five years old: balance must be 75% or less of the new appraised value
- Loan more than five years old: balance must be 80% or less of the new appraised value
A professional home appraisal costs roughly $314 to $423 for a standard single-family home, according to Bankrate. Before ordering one, run the numbers with your advisor. If you are only a few months from hitting 80% LTV through regular payments alone, the appraisal fee may not save you enough to justify the expense.
What Is the Difference Between PMI and MIP?
PMI and MIP are both mortgage insurance products, but they apply to different loan types and follow different removal rules. PMI covers conventional loans and can be canceled once you reach 20% equity, with automatic termination required at 78% LTV. MIP covers FHA loans and, for most loans originated after June 2013 with less than 10% down, remains for the entire loan term regardless of how much equity you build.
With a 10% or greater down payment on an FHA loan, MIP can be removed after 11 years. Outside of that, the most practical path to eliminating MIP is to refinance into a conventional loan once you have built sufficient equity.
Sprint Funding can run a side-by-side comparison of your current MIP cost against refinance closing costs and the new rate to determine whether the switch makes financial sense for your timeline.
Stop Paying PMI Longer Than You Have To
Every month PMI stays on your loan is money that protects your lender, not your future. Whether you’re six months from hitting 80% LTV or wondering if your home’s appreciation already qualifies you for early removal, the answer is worth finding out now. At Sprint Funding, our team reviews loan details every day and helps borrowers identify the fastest legal path to cancellation.
Reach out to us at 760-849-4475 to speak with a mortgage advisor who can tell you exactly where you stand.
Frequently Asked Questions About Private Mortgage Insurance (PMI)
What is private mortgage insurance (PMI)?
PMI is lender-protection insurance required on conventional mortgages when the down payment is less than 20%. It protects the lender, not the borrower, if the loan goes into default.
How much does PMI cost per month?
PMI costs $30 to $70 per month per $100,000 borrowed, according to Freddie Mac. On a $400,000 loan, expect to pay between $120 and $280 monthly, depending on your credit score and LTV ratio.
When can I request PMI cancellation?
You can request cancellation in writing once your loan balance reaches 80% of the home’s original value. You must be current on payments with no 30-day late payments in the past 12 months and no 60-day late payments in the past 24 months.
Does PMI get removed automatically?
Yes. Federal law requires your servicer to automatically terminate PMI when your principal balance is scheduled to reach 78% of the original home value, provided payments are current. No request is needed for automatic termination.
Can I remove PMI early if my home value has increased?
Yes, with a new appraisal. If your loan is two to five years old, your balance must be at or below 75% of the new appraised value. After five years, the threshold is 80%. Your advisor can confirm whether the appraisal cost justifies early removal given your remaining PMI timeline.
What is the difference between PMI and MIP?
PMI applies to conventional loans and can be removed at 20% equity. MIP applies to FHA loans and, for most loans originated after June 2013 with less than 10% down, stays for the life of the loan regardless of equity.
Do I need a home appraisal to remove PMI?
Usually yes. Cancellation based on the original home value may require an interior valuation to confirm the property has not declined in value. Removal based on current appreciation requires a full appraisal, which typically ranges from $314 to $423 for a standard single-family home, according to Bankrate.
Can I avoid PMI without a 20% down payment?
Some options exist. A piggyback second mortgage (an 80-10-10 structure) avoids PMI by keeping the first loan at exactly 80% LTV. Some lenders also offer lender-paid PMI, where the cost is folded into a slightly higher interest rate rather than a separate monthly charge. A Sprint Funding advisor can walk through which structure fits your situation and budget.
Does PMI protect me as the homeowner?
No. PMI protects the lender only. If foreclosure occurs, PMI covers a portion of the lender’s loss. It provides no direct financial benefit to the homeowner, which is exactly why removing it at the earliest legal opportunity matters.
How do I request PMI removal from my servicer?
Submit a written request to your loan servicer once your balance reaches 80% LTV. Include payment history documentation and, if required, a property valuation. Under the Homeowners Protection Act, your servicer is legally required to process the request and cannot charge you a fee simply for submitting it.
