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Private Mortgage Insurance: What It Covers and When It Can End

Mortgage insurance can make a smaller down payment possible, but the insurance protects the lender rather than replacing your own homeowners coverage. Its cost and cancellation rules depend on the kind of loan. Check your documents before assuming a premium will disappear automatically or that paying down the balance has the same effect on every mortgage.

The questions below use selected Consumer Financial Protection Bureau guidance, adapted and organized by Fynoptic. Source links and the dates displayed by those sources are provided at the end.

What is private mortgage insurance?

Private mortgage insurance (PMI) is a type of mortgage insurance you might be required to buy if you take out a conventional loan with a down payment of less than 20 percent of the purchase price. PMI protects the lender—not you—if you stop making payments on your loan.

The requirement to buy PMI usually also applies to refinancing a conventional loan, when your equity is less than 20 percent of the value of your home.

PMI is arranged by the lender and provided by private insurance companies. It insures the lender against loss caused by borrowers failing to make loan payments. Make no mistake: If you fall behind on your mortgage payments, PMI does not protect you and you can still lose your home through foreclosure.

PMI can help you qualify for a loan that you might not otherwise be able to get. But it can increase the cost of your loan.

How do I pay for PMI?

Before agreeing to a mortgage, ask lenders what PMI choices they offer.

The most common way to pay for PMI is a monthly premium.

  • The premium is shown on your Loan Estimate and Closing Disclosure on page 1, in the Projected Payments section.
  • The premium is added to your mortgage payment.

Sometimes you pay for PMI with a one-time up-front premium paid at closing.

  • The premium is shown on your Loan Estimate and Closing Disclosure on page 2, in section B.
  • If you make an up-front payment and then move or refinance, you might not be entitled to a refund of the premium.

Sometimes you pay with both up-front and monthly premiums.

Lenders might offer you more than one option. Ask the loan officer to help you calculate the total costs over a few different timeframes that are realistic for you.

How does PMI compare to other parts of my loan offer?

Ask lenders to show you detailed pricing for different options so you can compare and decide which option is the best deal for you.

Interest rate

Lenders sometimes offer conventional loans with smaller down payments that do not require PMI. As a tradeoff, you usually pay a higher interest rate for these loans. Paying a higher interest rate can be more or less expensive than the PMI, depending on a number of factors, including how long you plan to stay in the home.

Taxes

You might want to ask a tax advisor whether paying more in interest or paying PMI might affect your taxes differently.

Other loan programs

Borrowers making a low down payment might want to consider other types of loans, such as an FHA loan. Other types of loans may be more or less expensive than a conventional loan with PMI, depending on your credit score, your down payment amount, the lender, and general market conditions.

Down payment

You might consider saving up the money to make a 20 percent down payment. When you pay 20 percent down, PMI is not required with a conventional loan. You could also receive a lower interest rate with a 20 percent down payment.

When can I remove private mortgage insurance (PMI) from my loan?

You have the right to remove PMI for many mortgages, once you have paid down your mortgage to a specified point. Ending PMI reduces your monthly costs.

Some lenders and servicers may allow removal of PMI under their own standards. The information below describes the legal requirements that apply to mortgages for single-family principal residences that closed on or after July 29, 1999.

Mortgages through the Federal Housing Administration (FHA) or Department of Veterans Affairs (VA) have different requirements. For answers to questions about mortgage insurance on an FHA or VA loan, contact your servicer. If your lender is paying for your mortgage insurance, different rules apply.

Can I request cancellation of my PMI when my principal balance is 80 percent of the home’s original value?

Yes. You have the right to ask your servicer to cancel PMI on the date the principal balance of your mortgage is scheduled to fall to 80 percent of the original value of your home. The first date you can make the request should appear on your PMI disclosure form, which you received along with your mortgage. If you can't find the disclosure form, contact your servicer.

You can ask to cancel PMI ahead of the scheduled date, if you have made additional payments that reduce the principal balance of your mortgage to 80 percent of the original value of your home.

For this purpose, “original value” generally means either the contract sales price or the appraised value of your home at the time you purchased it, whichever is lower. But, if you have refinanced, the “original value” is the appraised value at the time you refinanced.

Your servicer is legally required to grant your request to cancel your PMI as long as you meet the criteria below:

  • You make your request in writing
  • You have a good payment history and are current on your payments
  • You can certify that there are no junior liens (such as a second mortgage) on your home
  • You can provide evidence (for example, an appraisal) that the value of your property hasn’t declined below the original value of the home—if it has, you may not be able to cancel PMI on schedule

Is my PMI automatically canceled once my principal balance is 78 percent of the home’s original value?

Yes. Even if you don’t ask your servicer to cancel PMI, in general, your servicer must automatically terminate PMI on the date when your principal balance is scheduled to reach 78 percent of the original value of your home. For your PMI to be cancelled on that date, you need to be current on your payments. Otherwise, PMI will not be terminated until shortly after your payments are brought up to date.

Is my PMI automatically canceled once I am halfway through my loan’s term?

Yes. Your lender or servicer must end the PMI the month after you reach the midpoint of your loan’s amortization schedule. (This is true even if the principal balance has not reached 78 percent of the original value of your home.) The midpoint of your loan’s amortization schedule is halfway through the original full term of your loan. For 30-year loans, the midpoint is after 15 years have passed.

This standard for ending the PMI halfway through the loan’s original term is more likely to occur for people who have a mortgage with an interest-only period, principal forbearance, or a balloon payment. Keep in mind that you must be current on your monthly payments for termination to occur.

Can my PMI be canceled earlier if I have a loan backed by Freddie Mac or Fannie Mae?

Yes. Loan investors, including Fannie Mae and Freddie Mac, often create their own PMI cancellation guidelines. But these guidelines cannot be less favorable to the borrower than the ones above.

What is mortgage insurance and how does it work?

Mortgage insurance lowers the risk to the lender of making a loan to you, so you can qualify for a loan that you might not otherwise be able to get.

Typically, borrowers making a down payment of less than 20 percent of the purchase price of the home need to pay for mortgage insurance. Mortgage insurance also is typically required on Federal Housing Administration (FHA) and U.S. Department of Agriculture (USDA) loans. Mortgage insurance lowers the risk to the lender of making a loan to you, so you can qualify for a loan that you might not otherwise be able to get. But, it increases the cost of your loan. If you are required to pay mortgage insurance, it is included in your total monthly payment that you make to your lender, your costs at closing, or both.

Does mortgage insurance protect the lender or the borrower?

Mortgage insurance, no matter what kind, protects the lender – not you – in the event that you fall behind on your payments. If you fall behind, your credit score could suffer and you can lose your home through foreclosure. Then, in the worst-case scenario, supposing your property is sold through foreclosure and the sale is not enough to cover your mortgage balance in full, mortgage insurance makes up the difference so that the company that holds your mortgage is repaid the full amount.

There are several different kinds of loans available to borrowers with low down payments. Depending on what kind of loan you get, you’ll pay for mortgage insurance in different ways.

Loan types and mortgage insurance

Conventional loan

If you get a conventional loan, your lender could arrange for mortgage insurance with a private company. Private mortgage insurance (PMI) rates vary by down payment amount and credit score but are generally cheaper than FHA rates for borrowers with good credit. Most private mortgage insurance is paid monthly, with little or no initial payment required at closing. Under certain circumstances, you can cancel your PMI.

Federal Housing Administration (FHA) loan

If you get a Federal Housing Administration (FHA) loan, your mortgage insurance premiums are paid to the FHA. FHA mortgage insurance is required for all FHA loans. It costs the same no matter your credit score, with only a slight increase in price for down payments less than five percent. FHA mortgage insurance includes both an upfront cost, paid as part of your closing costs, and a monthly cost, included in your monthly payment.

If you don’t have enough cash on hand to pay the upfront fee, you are allowed to roll the fee into your mortgage instead of paying it out of pocket. If you do this, your loan amount and the overall cost of your loan increases.

U.S. Department of Agriculture (USDA) loan

If you get a U.S. Department of Agriculture (USDA) loan, the program is similar to the Federal Housing Administration, but typically cheaper. You pay for the insurance both at closing and as part of your monthly payment. Like with FHA loans, you can roll the upfront portion of the insurance premium into your mortgage instead of paying it out of pocket, but doing so increases both your loan amount and your overall costs.

Department of Veterans’ Affairs (VA)-backed loan

If you get a Department of Veterans’ Affairs (VA)-backed loan, the VA guarantee replaces mortgage insurance, and functions similarly. With VA-backed loans, which are loans intended to help servicemembers, veterans, and their families, there is no monthly mortgage insurance premium. However, you pay an upfront “funding fee.” The amount of that fee varies based on:

  • Your type of military service
  • Your down payment amount
  • Your disability status
  • Whether you’re buying a home or refinancing
  • Whether this is your first VA loan, or you’ve had a VA loan before

Like with FHA and USDA loans, you can roll the upfront fee into your mortgage instead of paying it out of pocket, but doing so increases both your loan amount and your overall costs.

Tip

Once you’ve paid off some of your loan, you may be eligible to cancel your mortgage insurance. If you are able to cancel, you won’t have to pay the monthly cost. Learn more about cancelling your mortgage insurance.

Beware of "piggyback" second mortgages

As an alternative to mortgage insurance, some lenders may offer what is known as a “piggyback” second mortgage.

This option may be marketed as being cheaper, but that doesn’t necessarily mean it is. Always compare the total cost before making a final decision. Learn more about piggyback second mortgages.

How to get help

If you’re behind on your mortgage, or having a hard time making payments, you can use the CFPB's Find a Counselor tool to get a list of HUD-approved housing counseling agencies in your area. You can also call the HOPE™ Hotline, open 24 hours a day, seven days a week, at (888) 995-HOPE (4673).

Sources and further reading

The CFPB source passages are U.S. government work in the public domain. Fynoptic has selected, organized, and adapted the material for this guide, including corrections identified through the additional sources listed above. Sources accessed October 27, 2026. This use does not imply agency endorsement or affiliation.

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