How much is PMI? Real cost and when it drops off

What PMI is and when it applies

PMI is insurance you pay that protects your lender if you default. It kicks in on conventional mortgages when your down payment is under 20% — the lender takes on more risk, and PMI is the price. It doesn't build your equity, doesn't protect you, and doesn't lower your rate; it's purely an extra monthly cost until your loan-to-value (LTV) ratio drops enough. Once you owe 80% or less of the home's original value, you're generally entitled to get rid of it.

The $400K worked example

That $150 a month runs for years: $1,800 a year, every year, until the balance falls far enough. Over the life of the loan as scheduled, it totals $14,700 if you request cancellation at 80% LTV — real money for insurance that benefits only the lender.

The two drop-off lines: 80% request vs 78% automatic

There are two different finish lines, and confusing them costs $2,100 in this example:

The 78% automatic termination is a legal backstop — the servicer has to drop PMI when the balance hits 78% of the original value, no request needed. But the 80% line is available 14 months earlier, and the only thing standing between you and it is a phone call (plus, usually, a good payment history and possibly an appraisal).

Three ways to kill PMI early

1. Request cancellation at 80% LTV. The moment your balance hits $320,000, contact your servicer. You'll need a good payment history, and the lender may require an appraisal to confirm the value — a small cost against $150/month in savings.
2. Make extra principal payments. Every extra dollar moves the 80% line closer. A lump sum from a bonus or tax refund can shave months or years off the PMI timeline.
3. Refinance once you have 20% equity. If rates are favorable or your home has appreciated, a new loan at 80% LTV or better starts life with no PMI at all.

PMI vs. waiting to save 20%

Should you just wait until you have 20% down and skip PMI entirely? Sometimes — but waiting has an opportunity cost. While you save, home prices and rates can rise, which can cost more than the PMI ever would. There's no universal answer: it depends on how long saving 20% takes, what prices and rates do in the meantime, and what the $150/month buys you in the form of getting into a home sooner. Run both scenarios with your own timeline rather than treating "avoid PMI" as a rule.

Common mistakes

• Assuming it drops automatically at 80%. It doesn't — 80% requires your request. Only the 78% line is automatic. Wait passively and you pay until month 112 instead of month 98.
• Paying for an appraisal that comes in low. If the appraisal doesn't support enough value to hit 80% LTV, you've spent a few hundred dollars and PMI stays. Check comparable sales first.
• FHA MIP confusion. FHA mortgage insurance works differently from conventional PMI: for most FHA loans it can't be requested off at 80% — it lasts for the life of the loan or a set term, and refinancing into a conventional loan is usually the only exit.

Bottom line

PMI on this $400K example costs $150 a month — $14,700 by the time you can request it off at 80% LTV in month 98, or $16,800 if you sleep through the 80% line and wait for automatic termination at 78% in month 112. Mark the 80% date, request the cancellation, and consider extra principal payments to get there sooner. And if you're weighing buying with PMI against waiting, compare the real cost of waiting — not just the PMI you'd avoid. For the bigger buy-or-wait question, see rent vs buy: the real math.

Run your own numbers

Our free Home Equity Calculator estimates your current equity and loan-to-value so you can see how close you are to dropping PMI.

Open the Home Equity Calculator →

Related calculators

• Home Equity — track your equity and LTV toward the 80% line.
• Mortgage Payoff — model how extra payments speed up PMI removal.
• Rent vs Buy — compare buying with PMI against continuing to rent.