How to Get Rid of PMI: When It Makes Sense and How to Drop It

Private mortgage insurance — PMI — is one of the most misunderstood lines on a mortgage statement. Buyers treat it like a life sentence when, in reality, it's usually a temporary cost with a clearly defined exit. If you want to know how to get rid of PMI, the good news is that federal law hands you a roadmap — and on a conventional loan, the last step happens whether you ask for it or not.

I talk to Wisconsin buyers every week who delay buying for years because they're afraid of PMI, and others who keep paying it long after they could have dropped it. Both are costly mistakes. So let's clear it up: what PMI is, what it actually costs, when it's worth paying, and exactly how to make it go away.

What is PMI, and why are you paying it?

PMI is insurance that protects the lender — not you — in case you stop making payments. On a conventional loan, you generally pay it when your down payment is less than 20% of the purchase price. It's the lender's cushion against the added risk of a smaller down payment. It doesn't build equity, and it doesn't protect you; it simply makes the loan possible with less cash up front. (Worth noting: VA loans don't use PMI at all, and FHA loans use a different, government-backed premium — more on that below.)

How much does PMI actually cost?

PMI typically runs somewhere between about 0.3% and 1.5% of your loan amount per year, depending mostly on your credit score and how much you put down. Lower credit and a smaller down payment push the rate higher.

Here's a concrete example. Say you buy a $300,000 home with 10% down. Your loan is $270,000. At a PMI rate of roughly 0.6%, that's about $1,620 a year — around $135 added to your monthly payment. Real money, but not a fortune. And, as you're about to see, it's temporary.

When does paying PMI actually make sense?

It makes sense when the cost of waiting is higher than the cost of the insurance. If you can comfortably afford the payment, buying now with 5–10% down and a few years of PMI often beats renting while you chase a 20% target that keeps moving with the market. It makes less sense if the payment would strain your budget, or if you're already close to 20% — in which case nudging your down payment up a little can skip PMI entirely. There's no universal answer here; it's a math problem specific to your numbers.

How do you get rid of PMI on a conventional loan?

This is where the federal Homeowners Protection Act works in your favor. Borrower-paid PMI on a conventional loan comes off in one of three ways:

• Request it at 20% equity. Once your balance reaches 80% of the home's original value, you can ask your servicer in writing to cancel PMI. You'll need a solid payment history and, sometimes, an appraisal confirming the value hasn't fallen.
• Automatic termination at 22% equity. When your balance is scheduled to hit 78% of the original value, your servicer must remove PMI automatically — no request required — as long as you're current on payments.
• The midpoint backstop. If you somehow haven't hit those thresholds, PMI must end at the halfway point of your loan term.

There's also a faster lever many people overlook: appreciation. If your home's value has climbed, you may already have 20% equity even though your balance has barely moved. A new appraisal can prove it and get PMI removed early — well worth checking in a market where Wisconsin home values have risen. On that $270,000 loan, you'd request cancellation once you owe about $240,000 (80% of the original $300,000 value), and automatic termination lands near $234,000.

What about FHA loans — does that insurance ever go away?

This one trips people up. FHA loans don't carry PMI; they carry a government mortgage insurance premium (MIP), and the rules are different. On most FHA loans today, MIP lasts the life of the loan if you put down less than 10%, or 11 years if you put down 10% or more. The usual way to get rid of FHA MIP is to refinance into a conventional loan once you've built enough equity. If you're still deciding between the two loan types, that long-term insurance difference is a big part of the decision — I break it down in my conventional vs FHA guide.

The bottom line

PMI isn't a trap — it's a temporary cost with a written exit. On a conventional loan you can request cancellation at 20% equity, it falls off automatically at 22%, and rising home values can get you there sooner. The real mistake isn't paying PMI; it's not having a plan to drop it. If you're not sure where your loan stands today, let's look at the numbers together.