How PMI Actually Ends

PMI on a 10%-down $420,000 home runs $189 a month and ends at month 95 by payments alone at 6.5% — about $18,000 all in. The three exits, priced by our model.

Put less than 20% down and your mortgage comes with private mortgage insurance — on our model’s default scenario ($420,000 home, 10% down, 6.5% rate) that’s $189 a month, and if you do nothing but make your payments, it lasts until month 95 — just under eight years and about $18,000 of premiums. There are exactly three ways out: the balance crosses the line on its own, you push it across early, or the loan hits its midpoint. Which exit you get is a four-to-five-figure difference, so it’s worth knowing the mechanics precisely.

What is PMI and what does it cost?

PMI is insurance that protects the lender — not you — against default on a low-down-payment loan, and you pay for it. Freddie Mac’s consumer guidance puts the typical cost at $30 to $70 a month per $100,000 borrowed (0.36% to 0.84% a year), and Urban Institute pricing data spans roughly 0.6% to 1.9% depending on credit score and down payment; our model’s tested default is 0.6%. On the default $420,000 home that means:

The premium is set against the original loan amount and does not shrink as you pay the loan down — it simply stops when you qualify to drop it. Every month it runs, it buys you nothing: no equity, no coverage for you, no tax deduction in most current cases.

When does PMI go away on its own?

Under the federal Homeowners Protection Act there are two lines that matter, both measured against the home’s original value, not what it’s worth today:

• 80% — you can ask. Once the balance amortizes to 80% of the original price, you can request cancellation in writing (the lender can require a clean payment history and no second liens).
• 78% — it must stop. At 78%, the lender is required to terminate PMI automatically, provided you’re current on payments.
• The midpoint backstop. Whatever else happens, PMI must end at the loan’s halfway point — year 15 of a 30-year term — even if the balance hasn’t reached the thresholds.

By payments alone at 6.5%, our model’s amortization puts the 80% crossing at month 95 on a 10% down payment (just under eight years, about $18,000 of premiums paid) and at month 124 on 5% down (just over ten years, about $23,900). Our model cancels PMI at the 80% request line — it assumes you ask the month you’re entitled to, and it deliberately does not credit appreciation, because the appraisal route below is lender-dependent rather than guaranteed.

How do you get rid of PMI early?

The amortization schedule is the slow road; there are three faster ones.

The appraisal route. If your home’s current value has risen enough, most lenders will cancel PMI at 75–80% of the new appraised value — commonly 75% if you’ve had the loan under five years, 80% after. You pay for the appraisal (a few hundred dollars), and the rules are the lender’s, not federal law — some servicers are cooperative, some are not. After a few years of ordinary appreciation this is very often the cheapest exit: on the model’s default 3% appreciation, a 10%-down buyer reaches 80% of current value years before month 95.

Extra principal. Every extra dollar of principal moves the 80%-of-original line closer on a schedule you control. This is the guaranteed version of the appraisal route — no appraisal, no lender discretion — but the money is then in the house, with everything opportunity cost implies. That trade-off — dollars locked in home equity versus dollars compounding in the market — is the whole subject of does buying a house build wealth.

Refinancing. A refinance resets the loan against current value, so if you’re past 20% equity, the new loan has no PMI. Only sensible when the rate math works on its own — trading up to a worse rate to shed $189 a month usually loses.

How much does PMI swing the rent-vs-buy verdict?

Less than the down payment itself does — but the two arrive together. Our model’s default 10-year scenario, all three down payments, everything else equal:

The PMI premiums are only part of the widening gap — the rest is interest on the larger loan. But there’s an honest counterweight the table can’t show: waiting years to save 20% has costs of its own — the rent you pay meanwhile, and whatever prices and rates do while you wait. The model can price a 10%-down purchase today against the same purchase at 5% down; it cannot price your patience. Run both and look at the gap rather than assuming 20% is a law of nature.

Run your own numbers

Open the calculator with 10% down loaded, set your actual price, rate, and rent, and check two things: what PMI adds per month, and how far the verdict moves when you flip the down payment to 20%. Every formula, including the PMI cancellation rule, is documented on the methodology page.