Skip to main content
Quick Mortgage Loans - home loans and VA lending in Phoenix, Arizona
Credit & Qualification

PMI: What It Is, When It Drops

Private mortgage insurance rules, cost drivers, and how to remove it faster than the automatic schedule.

8 min
Read time
2026-06-01
Last updated
Credit & Qualification
Topic
On this page01The Short Version02How PMI Is Priced03The Four Ways to Structure PMI04Removing PMI on Schedule05Removing PMI Early - the Two Paths06FHA MIP: a Different Animal
01

The Short Version

PMI (Private Mortgage Insurance) is required on conventional loans when your down payment is less than 20%. It's not permanent - it drops off automatically at 78% loan-to-value and can be removed on request at 80%. Your monthly PMI is set at loan origination based mostly on credit score and loan-to-value.

FHA's version is called MIP, and it behaves differently: on loans originated today with less than 10% down, MIP stays for the life of the loan. That's the single biggest reason to refinance out of FHA once you have 20% equity.

What you'll learn in this guide
  1. 02How PMI Is Priced
  2. 03The Four Ways to Structure PMI
  3. 04Removing PMI on Schedule
  4. 05Removing PMI Early - the Two Paths
  5. 06FHA MIP: a Different Animal
Level

Plain-English

No jargon, real examples

Written by

Licensed advisors

Quick Mortgage Loans

Good for

Credit & Qualification

Buyers & homeowners

02

How PMI Is Priced

PMI premium is a small percentage of the loan amount annually, divided by 12 and added to your monthly payment. The rate depends on credit score, loan-to-value, loan term, and occupancy. Better credit + more down payment = lower PMI.

Illustrative Monthly PMI on a $380,000 Conventional Loan
760+ credit, 5% down≈ $95–$115 / mo
720–759 credit, 5% down≈ $130–$165 / mo
680–719 credit, 5% down≈ $190–$240 / mo
660–679 credit, 5% down≈ $260–$320 / mo
760+ credit, 10% down≈ $65–$80 / mo
760+ credit, 15% down≈ $30–$45 / mo
Illustration only. Actual PMI depends on the specific MI provider quote at underwriting.
03

The Four Ways to Structure PMI

'PMI' is a category, not a single product. There are four structures, and the right one depends on how long you plan to keep the loan.

Key points
  • Borrower-Paid Monthly (BPMI): the default. Small monthly amount, cancellable at 80% LTV.
  • Lender-Paid (LPMI): the lender absorbs PMI in exchange for a slightly higher rate (usually 0.25%–0.375% higher). Not cancellable - you refinance out of it.
  • Single Premium: pay all PMI up front at closing. Best when you'll stay 5+ years and don't want a monthly hit.
  • Split Premium: partial up-front payment and lower monthly. Middle ground.
When Lender-Paid PMI Actually Wins

LPMI often looks worse on paper because of the higher rate, but on short-hold loans (3–5 years) the total cost can be lower. If you might refinance or sell in the next few years, ask for both quotes side by side.

04Section 4

Removing PMI on Schedule

Two federal rules govern automatic PMI removal on conventional loans: PMI must be terminated automatically when the loan reaches 78% of the original property value based on the amortization schedule, and you can request removal at 80% LTV based on the original value. Both use original value, not current value.

That means paying down principal on schedule gets you there predictably. On a 30-year loan with 5% down, you typically reach 80% around year 10 based purely on amortization.

05

Removing PMI Early - the Two Paths

You don't have to wait for the automatic schedule. If your home has appreciated or you've paid extra principal, you can shortcut it.

Key points
  • Path 1 - Extra principal payments: Pay down the balance to 80% of the original value and formally request cancellation. Lender confirms and removes PMI at the next servicing cycle.
  • Path 2 - New appraisal: If the home has appreciated, request PMI removal based on current value. Most servicers require the loan to be at least 2 years old (5 years if you want to go below 75% LTV using current value), and you pay for the appraisal ($550–$800). If the appraisal supports it, PMI comes off.
  • Path 3 - Refinance: If rates support it, refinancing into a new loan below 80% LTV eliminates PMI. Only makes sense if the refi passes its own break-even test.
06

FHA MIP: a Different Animal

FHA's Mortgage Insurance Premium (MIP) doesn't work like conventional PMI. There's an upfront 1.75% financed into the loan, plus annual MIP paid monthly. For loans with less than 10% down, MIP stays for the life of the loan - even at 60% LTV. For loans with 10% or more down, MIP falls off after 11 years.

This is the mechanic that drives many FHA borrowers to refinance into a conventional loan once they've built 20% equity. Even at a higher interest rate, dropping MIP entirely often wins on total monthly cost.

FAQ

Frequently Asked

Send a written request to your loan servicer once you're at 80% LTV based on original value. They must respond and, if you meet the criteria (on-time payment history, no second liens), remove PMI at the next servicing cycle.
Keep learning

More in Credit & Qualification

Read next

FHA vs. Conventional: Which Loan Fits You?

A side-by-side look at credit, down payment, and mortgage insurance - with real math on which loan actually costs less.

Start reading
Also in this category

Loan Programs

All loans

Run the Numbers

All calculators

Free Guides

All guides
Ready when you are

Have a Specific Question About Your Situation?

A licensed advisor is a quick call away - no obligation.

Talk to an Advisor Schedule a Consultation (602) 413-5531
Call Now Get Preapproved