Private Mortgage Insurance (PMI)
PMI protects the lender if you stop paying. It’s required on conventional loans with less than 20% down. Here’s how much it costs and six ways to make it disappear.
PMI Cost Snapshot
| Credit Score | LTV 95% | LTV 90% | LTV 85% |
|---|---|---|---|
| 760+ | 0.19%/yr | 0.14%/yr | 0.10%/yr |
| 700–739 | 0.46%/yr | 0.34%/yr | 0.25%/yr |
| 660–679 | 0.90%/yr | 0.67%/yr | 0.49%/yr |
Quick math: $400k loan × 0.46% = $1,840/year ≈ $153/month
Types of PMI
- Borrower-paid monthly: Most common; cancels later.
- Single-premium: One-time payment at closing or rolled into loan.
- Lender-paid PMI (LPMI): Higher rate instead of monthly PMI; can’t be cancelled.
- Split-premium: Part upfront, part monthly; good for high credit scores.
Automatic Termination Rules
- 78% LTV: Lender must cancel PMI when your principal balance reaches 78% of the original value.
- 80% LTV: You can request cancellation in writing if you’re current on payments and have no second liens.
- Midpoint: If you’re on-time with payments, PMI terminates at the midpoint of your amortization schedule (15 years on a 30-year loan).
6 Ways to Remove PMI Faster
- Pay down principal with extra payments or a lump-sum.
- Home appreciation: Order a new appraisal ($400–$600) if you think values have risen enough to hit 80% LTV.
- Remodel: Finish the basement or add a bathroom—then reappraise.
- Refinance: If rates have dropped and you now have 20% equity.
- Choose LPMI upfront if you plan to stay less than 7 years.
- Piggyback 80-10-10: 10% down, 10% second mortgage, avoid PMI entirely.
Important: FHA loans require MIP (Mortgage Insurance Premium) for the entire loan unless you put 10% down—then it drops after 11 years. You must refinance into conventional to remove it earlier.
Sample Cancellation Letter
Send certified mail or upload via your servicer’s portal:
[Date] [Loan Servicer Name] [Address] Re: Request for PMI Cancellation Loan #: [insert] Property: [address] I am requesting cancellation of private mortgage insurance as allowed under the Homeowners Protection Act. My loan is current, I have no second liens, and the principal balance is below 80% of the original value. Please send me any forms required and let me know the next steps. Sincerely, [Your name, signature, phone, email]
What to Expect After You Request
- Servicer must respond within 30 days.
- They may order a new appraisal at your cost.
- PMI must be cancelled within 45 days if you meet the requirements.