What Is PMI and How Do You Get Rid of It?

If you've ever looked at a mortgage estimate and noticed a line item you didn't recognize, there's a good chance it was PMI. It's one of the most common — and most misunderstood — parts of the homebuying process.

Here's what it is, why it exists, and how to stop paying it.

What Is PMI?

PMI stands for Private Mortgage Insurance. It's a type of insurance that protects the lender — not you — if you were to stop making payments on your loan.

Lenders typically require PMI when you put down less than 20% on a conventional loan. From the lender's perspective, a smaller down payment means more risk. PMI offsets that risk.

It's important to note: PMI is not the same as homeowners insurance. Homeowners insurance protects your property. PMI protects your lender.

How Much Does PMI Cost?

PMI is typically added to your monthly mortgage payment. The exact amount depends on your loan size, credit score, and down payment, but it generally ranges from 0.3% to 1.5% of the original loan amount per year.

On a $350,000 loan, that could be anywhere from roughly $87 to $437 per month. This example is for illustrative purposes only and is not a loan quote or payment offer. It adds up — which is why understanding when and how to remove it matters.

Is PMI Always Required?

Not always. PMI is specific to conventional loans with less than 20% down. If you're using a VA loan, PMI is not required. FHA loans have their own form of mortgage insurance, called MIP, which works differently. FHA mortgage insurance may remain for the life of the loan depending on down payment and loan terms.

Your loan officer can help you understand exactly what applies to your situation based on the loan type you qualify for.

When Can You Get Rid of PMI?

The good news: PMI doesn't last forever.

On a conventional loan, there are generally three ways PMI is removed:

Automatic cancellation. By law, your lender is required to cancel PMI once your loan balance reaches 78% of the original value — as long as your payments are current.

Borrower-requested cancellation. You can request removal once your loan balance drops to 80% of the original value. You may need to demonstrate that your home hasn't decreased in value, and your payment history will be reviewed.

Refinancing. If your home has appreciated significantly, refinancing into a new loan may eliminate PMI if you now have 20% or more in equity.

How to Know When You're Close

If you want to track your progress, start with your original loan balance and calculate 80% of that number. That's your target. You can make extra principal payments to reach it faster — just confirm with your loan servicer how those payments are applied.

Your annual mortgage statement will show your current balance, making it easy to monitor where you stand.

PMI Isn't a Permanent Cost

For many buyers, PMI is simply part of getting into a home sooner — before they've saved a full 20%. That's a reasonable trade-off. The key is knowing the rules so you can remove it as soon as you're eligible.

At Princeton Mortgage, we help you understand every line of your loan — from PMI to closing costs — so there are no surprises and no money left on the table.

Ready to Talk Through Your Options?

Connect with a Princeton Mortgage Loan Officer to review your current mortgage, explore your equity position, or discuss loan options that may not require PMI. Eligibility and loan options vary based on borrower qualifications and loan program.