Private Mortgage Insurance (PMI)

Reviewed 12 August 2026 · Sourced from the Homeowners Protection Act, the CFPB, HUD, VA, USDA and Fannie Mae's Servicing Guide

What PMI actually is

You have $12,500 saved. The house is $250,000. That is 5% down, and the loan officer says the next number like it is nothing: “and private mortgage insurance, about $109 a month.” Your brother-in-law says never pay PMI. Somebody at work says it falls off automatically. Somebody else says theirs never did.

None of that tells you what it is, who it pays, or when it stops.

Private mortgage insurance is a policy that pays the lender if you stop paying. You pay the premium. The lender is the insured party. You cannot claim on it, and it will not cover a dollar of your mortgage if you lose your job.

Those three ways come from the Homeowners Protection Act of 1998, 12 U.S.C. §§ 4901 to 4910: a balance where you can demand cancellation, a lower one where the servicer must end it unasked, and a hard stop halfway through the loan. All three dates are knowable today, from the amortization schedule you were handed at closing.

What the Act does not reach is the loan a lot of people starting over actually get. FHA mortgage insurance is not PMI, and on a typical FHA loan it never comes off at all — the most expensive misunderstanding on this page, and covered in full below.

Why the loan needs it at all

PMI reads like a fee invented to punish people who could not save 20%. It is the condition attached to a loan that otherwise does not get funded.

Most conventional mortgages are sold to Fannie Mae or Freddie Mac, and both are limited by charter. 12 U.S.C. § 1454(a)(2) bars Freddie Mac from buying a conventional mortgage on a one-to-four-family property if the balance “exceeds 80 per centum of the value of the property securing the mortgage,” unless the seller keeps a 10% participation, agrees to buy the loan back on default, or the portion “in excess of such 80 per centum is guaranteed or insured by a qualified insurer.”

That third option is PMI, and notice what it insures: not the whole loan, only the slice above 80%. It makes the top of the loan look, to whoever buys it, as though it was never there.

So the real comparison is not this loan with PMI against this loan without it. It is this loan against no loan for several more years. On a $250,000 house the gap between 5% down and 20% down is $37,500; at $500 a month that is 75 months — six years and three months, our own arithmetic, before any argument about what the house costs by then.

Be equally clear about what the premium buys you: nothing. If the insurer pays a claim, the money goes to the lender. You still lost the house and your credit is still wrecked. What the premiums bought was access.

What it costs, and who sets the price

PMI is priced by the insurer, not by your lender. The biggest inputs are your loan-to-value ratio and your credit score; coverage percentage, term, occupancy and debt-to-income move it too.

Quoting a rate is hard: the major insurers moved to proprietary pricing engines and largely stopped publishing public rate cards. Enact's last published national borrower-paid monthly card (effective June 4, 2018, updated January 27, 2022) is a snapshot, not a quote, but it shows the shape of the pricing — annual rates at 25% coverage on a 30-year fixed loan:

Read the bottom row twice. On the $237,500 loan below, a 720-739 score prices at 0.59% a year — $116.77 a month. A 620-639 score prices at 1.25% — $247.40. Same house, same down payment, same lender. The gap is $130.63 a month, about $16,200 across the ten years to cancellation — which makes fixing the credit file before you shop worth more than a bigger down payment.

For an industry figure rather than one card, the Urban Institute's Mortgage Insurance Data at a Glance 2025 puts the industry's in-force premium yield at 39.4 basis points in 2024, down from 52.5 in 2017 (p. 33) — premiums earned divided by insurance in force, an average across every policy rather than anyone's quote. It also puts the 2024 average credit score on purchase loans carrying private MI at 750 and the average LTV at 93.0%.

What is sourced here and what isn't

The three ways it ends

The Act was signed in July 1998 as Pub. L. 105-216, and its cancellation rules apply to mortgages consummated on or after July 29, 1999; older loans get only the annual-notice right in § 4903(b). Everything then turns on one defined term. Original value means, under § 4901(12), “the lesser of the sales price of the property securing the mortgage, as reflected in the contract, or the appraised value” at consummation — on a refinance, the appraised value the lender relied on. It is frozen at closing. Your house doubling in value does not move it.

The 80% request, and its four conditions

§ 4902(a) cancels the requirement on the cancellation date “or any later date that the mortgagor fulfills” the conditions — so missing the date does not forfeit the right, it waits. The four: a written request, a good payment history, being current, and satisfying any holder requirement for evidence the value has not declined below original value, plus certification that your equity “is unencumbered by a subordinate lien.”

Good payment history is defined rather than left to the servicer: under § 4901(4), no payment 60 days or more past due in the 12 months before the request, and none 30 days or more past due in the 12 months before that — a 24-month lookback with two standards. The lender controls two of the four conditions: it sets what evidence of value it accepts and can refuse if value fell. But § 4902(a)(4)(A) requires that evidence be “of a type established in advance and made known to the mortgagor by the servicer promptly upon receipt” of the request — so ask for it in writing first.

The 78% automatic termination

One condition: current. If you are behind on the termination date, § 4902(b) terminates on the first day of the first month after you become current. No request, no appraisal, no lien certification, no value test. It is the servicer's job, and the reason to know your date is that servicers miss it.

The midpoint backstop

§ 4902(c) is three lines almost nobody has read: if PMI is not otherwise canceled or terminated, “in no case may such a requirement be imposed on residential mortgage transactions beyond the first day of the month immediately following the date that is the midpoint of the amortization period of the loan if the mortgagor is current on the payments required by the terms of the mortgage.” On a 30-year loan that is month 181. It does not care about your balance, your appraisal, or a payment structure that barely amortizes. Once either route triggers, § 4902(f) also requires that “all unearned premiums for private mortgage insurance shall be returned to the mortgagor by the servicer” within 45 days.

A worked example, month by month

So the two dates are month 124, ten years and four months, and month 135, eleven years and three months. Eleven months apart.

Write the letter and stop at month 124: about 124 premiums, $13,497. Say nothing and wait for automatic termination: 135 premiums, $14,695. The letter is worth $1,197.35.

Two things there deserve a second look. By the end of year one you have paid $18,013.94 and the balance has dropped $2,655, because $15,359.34 of it was interest — amortization doing what it does, and why PMI feels permanent early on. And nothing in the table refers to what the house is worth: the clock runs on the schedule, not the market.

How to actually get it canceled

The 80% cancellation is the only one of the three that needs you to act, and the statute puts the request in writing for a reason: it starts clocks.

1. Find your original value — on a purchase, the lesser of the contract price and the appraisal at closing (§ 4901(12)). It is on your Closing Disclosure. Write it somewhere you will find it in ten years.
2. Multiply by 0.80. That is your target balance. Find the month your original schedule reaches it — the one § 4903(a)(1) required the lender to hand you on a fixed-rate loan, or rebuild it with the mortgage calculator.
3. Send a written request. Loan number, property address, and a line stating that you are requesting cancellation of private mortgage insurance under 12 U.S.C. § 4902(a), with the original value and the current balance. In the same letter, ask what evidence of value the servicer requires — § 4902(a)(4)(A) says that has to be established in advance and made known to you promptly.
4. Certify no subordinate lien (§ 4902(a)(4)(B)). If a second mortgage or HELOC sits on the property, this condition cannot be met until it is gone.
5. Watch the clocks. No premium may be charged more than 30 days after the conditions are met (§ 4902(e)), and unearned premiums come back within 45 days (§ 4902(f)). If one is still there two cycles later, complain in writing and cite the subsections.

The other door: current value

The statute ignores appreciation. Investor guidelines do not, and this is the path that rewards extra principal, because it runs on your actual balance. Fannie Mae's Servicing Guide B-8.1-04 lets a borrower request termination based on the property's current value on a one-unit principal residence: LTV of 75% or less if the loan is two to five years old, or 80% or less after five years, with its own payment test — current, nothing 30 days past due in 12 months, nothing 60 days past due in 24. Documented improvements that substantially raised the value can waive the two-year seasoning, and the servicer obtains the valuation. It is not a legal right: it is an investor rule that can change, and it applies only if Fannie Mae owns your loan.

FHA, VA and USDA are not PMI

This is the correction that costs the most money, and it is baked into the definitions. “Private mortgage insurance” under § 4901(13) means mortgage insurance other than coverage under the National Housing Act, title 38 or title V of the Housing Act of 1949 — other than FHA, VA and USDA. All three are carved out of the Act by definition. None of the three termination mechanisms apply to them.

FHA

FHA charges two premiums: an up-front MIP of 1.75% of the base loan amount, normally financed in, plus an annual MIP collected monthly. Rates come from HUD Mortgagee Letter 2023-05, for case numbers endorsed on or after March 20, 2023, on terms over 15 years:

Those rates are for a base loan amount up to $726,200; terms of 15 years or less price separately, and Appendix 1.0 of HUD Handbook 4000.1 is the live authority.

The duration column is the whole story, and it comes from Mortgagee Letter 2013-04, effective for case numbers assigned on or after June 3, 2013: original LTV above 90% means annual MIP for the full loan term, 90% or below means 11 years. Before that letter, FHA MIP canceled at 78% much like PMI. And since FHA's minimum down payment is 3.5%, a 96.5% LTV, most FHA borrowers are in the life-of-loan bucket, where paying the balance down does nothing. The only exits are selling or refinancing into a conventional loan.

VA and USDA

A VA loan has no monthly mortgage insurance at all — just a one-time funding fee. On a purchase, for rates effective April 7, 2023: first use is 2.15% under 5% down, 1.5% at 5% or more, 1.25% at 10% or more; subsequent use jumps to 3.3% under 5% down, then the same 1.5% and 1.25%. VA also decides who is exempt entirely — that call is VA's, not the lender's.

USDA's guaranteed loan program charges a 1% up-front guarantee fee and a 0.35% annual fee on the average scheduled unpaid principal balance, per USDA Rural Development's January 2026 program overview, and the annual fee runs for the life of the loan. Both reset by fiscal year, capped by the Housing Act of 1949 at 3.5% up front and 0.5% annually — so last year's quote is not automatically this year's.

The ways around it, and what each costs instead

Three structures are sold as avoiding PMI. None removes the cost of a small down payment: lender-paid PMI moves it into the rate, single-premium PMI into closing, and a piggyback into a second lien — and each has different rules for when it ends.

Lender-paid PMI

The lender buys the coverage and prices it into a higher note rate. No mortgage insurance line on your statement, which is the selling point. The trade is structural: there is no premium to cancel, so none of the § 4902 mechanisms reach you. Hit 78%, hit the midpoint, pay down to 40% LTV — the rate is the rate, and the only exit is a refinance. You have swapped a charge that expires by law for one that expires when you replace the loan.

Single-premium PMI

One payment at closing instead of a monthly premium, paid in cash or financed. Financing it means paying interest on the premium for up to 30 years, and it raises your balance, which pushes back the month the schedule reaches 80%. Ask before signing whether the policy is refundable or non-refundable — that decides what happens if you sell in year four, and non-refundable is cheaper for a reason.

The piggyback second

An 80/10/10 or 80/15/5 splits the financing: a first mortgage at exactly 80% of value, a second lien for the rest, and your cash down. No PMI, because the first is not above 80%. What you have instead is a second payment, usually at a higher rate and often variable, on a lien that has to be paid or refinanced on its own terms.

And refinancing to drop PMI

It is presented as a free win and it is not one. A refinance resets the schedule to a fresh 360 months, so refinancing in year eight means 38 years of payments on the same house. It resets original value to the new appraised value the lender relied on (§ 4901(12)), starting a new set of statutory dates. It costs closing costs, and it may raise the rate or cost discount points to avoid raising it.

What trips people up

• Waiting for the automatic cutoff when the request right ripened almost a year earlier. In the example above that is 11 extra premiums — $1,197 — for not writing one letter.
• Assuming appreciation counts. For the statutory thresholds it does not: original value is frozen at closing under § 4901(12). The current-value path is an investor rule with seasoning and payment tests, not a right.
• Opening a HELOC while PMI is still on the loan. It disables the § 4902(a)(4)(B) certification, which disables the request.
• One 30-day late at the wrong moment. Good payment history is a 24-month lookback, so a single late payment in month 118 can push a month-124 cancellation out by a year.
• Believing FHA works like PMI. On a 3.5%-down FHA loan the annual MIP runs for the full loan term. It will not fall off, and no letter will make it.
• Not asking up front what evidence of value the servicer wants — it must tell you promptly under § 4902(a)(4)(A), and finding out after you file turns a 30-day process into six months. Read the annual notice § 4903(a)(3) requires them to send, too.
• Treating “never pay PMI” as advice. It is a preference. Whether it fits depends on rent, prices, what you can save monthly and how stable your income is — worth running in Stage 5 before a slogan decides it.

The figures on this page are checked against the source that publishes them, and dated. Published rates move after the release named above — the linked source always carries the current number. This page explains a term; it does not recommend a product.