If you’re putting less than 20% down, somewhere in your quote you’ll see a line for PMI — private mortgage insurance — and most people’s first reaction is some version of “great, a penalty for not having more cash.” I understand the reaction. But that framing is wrong, and it pushes people toward worse decisions: either waiting years they didn’t need to wait, or jumping into an FHA loan that quietly costs them more over time. Let me walk through what PMI really is, why it’s often the smart move, exactly how you get rid of it, and how it stacks up against FHA’s version — which behaves very differently.

What PMI actually is — and who it protects

Here’s the honest version, the one a sales pitch tends to skip: PMI protects the lender, not you. If you put less than 20% down and later default, PMI covers part of the lender’s loss. You pay the premium; they get the protection. No spin on that — that’s simply what it is.

It’s required on conventional loans any time your loan is more than 80% of the home’s value — in other words, whenever you put less than 20% down. The cost typically runs from about 0.3% to 1.5% of the loan per year, driven mostly by your credit score and how much you put down. On a $300,000 loan that’s roughly $75 to $300 a month — a real number, which is exactly why getting it priced right (and getting rid of it) matters.

That credit-driven part is worth pausing on, because it’s one of the few mortgage costs you can move before you ever apply. I’ve helped a client cut their PMI cost meaningfully just by fixing how their credit was reported before we pulled it — that breakdown is in how one credit move saved a client $3,889. And if you want to see how PMI folds into a full monthly payment rather than sitting off to the side, run your numbers through my mortgage calculator.

Why it’s not the villain it’s made out to be

If PMI only protects the lender, why am I telling you it’s often a good thing? Because of what it lets you do: buy now, with far less cash, instead of waiting.

Run the actual trade-off. Say it would take you another four years to save from 5% down up to a full 20%. In those four years you’re paying rent, the home you wanted probably appreciates out of reach, and you’re building zero equity of your own. Against all of that, PMI is a couple hundred dollars a month — on a cost you can usually remove in a few years anyway. For most buyers, the math of getting in earlier beats the math of waiting around to dodge PMI.

The key word there is removable. On a conventional loan, PMI is temporary by design. It is not a permanent passenger on your payment. Which brings us to the part you actually came here for.

How to actually get rid of PMI

There are a few ways PMI comes off a conventional loan, and you should know all of them — because servicers won’t always volunteer the faster routes.

It falls off automatically — eventually

By federal law (the Homeowners Protection Act), your servicer has to cancel PMI automatically once your loan balance reaches 78% of the home’s original value on your regular payment schedule, as long as you’re current. You don’t have to ask. But waiting for that automatic point is the slowest route — it’s the floor, not the goal.

You can request it sooner, at 80%

You can request cancellation in writing once you reach 80% of the original value — one step earlier than the automatic point. You’ll generally need a solid payment history and no second mortgage sitting behind the first. This is the simplest lever most people never bother to pull.

Pay it down faster

Because both of those thresholds are about your balance, extra principal payments get you there sooner. Even modest additional payments can pull your cancellation date in by months — sometimes years. If shedding PMI is the specific goal, that’s often the cleanest way to accelerate it.

Use your home’s appreciation — the one people miss

This is the underused one. You don’t necessarily have to wait to pay the balance down — if your home’s value has risen, you may already have the equity. Depending on your loan’s investor and how long you’ve owned it, you can request cancellation based on the home’s current value by ordering a new appraisal. The seasoning rules vary — often you need to have owned the home around two years, sometimes longer to use a lower equity bar — but in a market where values have climbed, this can knock PMI off well ahead of schedule. If your home’s gone up and nobody’s mentioned this to you, that’s money sitting on the table.

And a final backstop

If none of the above gets there first, PMI must drop at the loan’s midpoint — year 15 of a 30-year loan — by law, regardless of value. That’s the last-resort safety net, not a plan you’d want to rely on.

FHA’s version is a different animal — and it doesn’t always leave

Everything above is conventional. FHA loans don’t carry PMI — they have MIP, the mortgage insurance premium, and it works differently in ways that catch a lot of people off guard.

There are two pieces. First, an upfront premium of 1.75% of the loan, added to your balance at closing — on a $300,000 loan, that’s about $5,250 financed into the loan. Second, an annual premium — 0.55% for most borrowers in 2026 — paid monthly, similar to PMI.

Here’s the part that matters most, and the part most FHA borrowers don’t discover until much later: if you put down less than 10% — which describes most FHA buyers, since the whole appeal is the 3.5%-down option — that annual MIP stays for the entire life of the loan. It does not fall off at 78% or 80% the way conventional PMI does. Reaching 20% equity, 30% equity, doesn’t matter — the MIP keeps going.

The only way to get rid of it is to refinance out of FHA entirely, into a conventional loan, once you have enough equity to do that without PMI. (If you put 10% or more down, the rules are friendlier — MIP drops after 11 years. But that’s the minority of FHA buyers.) One small mercy: if you end up refinancing into another FHA loan within the first three years, you may get a partial credit back on that upfront premium — worth asking about, though it doesn’t change the bigger picture.

PMI vs. MIP, side by side

So which is actually better for you?

This is where I owe you the real answer instead of a tidy one: it depends on your file, and anyone who tells you one is always better is guessing.

For a borrower who can qualify conventional, the removable nature of PMI often makes it the better long-term deal — you carry the insurance for a few years and then it’s gone, versus paying FHA’s premium potentially for the life of the loan. But FHA exists for good reasons: it’s more forgiving on credit scores and debt ratios, and for plenty of buyers it’s either the only path or the cheaper monthly payment today. I’m not here to talk you out of FHA — I close plenty of FHA loans, and they’re the right call when they’re the right call.

What I won’t do is drop you into an FHA loan with lifetime insurance without first checking whether conventional with cancellable PMI gets you a better outcome — or confirming the reverse. That comparison is exactly the kind of thing a broker should be running both ways for you, and it’s easy to get wrong when someone only offers one of the two.

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The short version: PMI isn’t a penalty, it’s the price of getting in early — and on a conventional loan, it’s a price with an expiration date. Know your cancellation thresholds, keep an eye on your home’s value, and don’t let anyone tell you it’s permanent when it isn’t. And if you’re weighing FHA against conventional, make sure someone is actually putting the lifetime cost of both in front of you — not just the payment for month one.