What Is PMI — and How Do You Avoid It?
By Colson · Reviewed by Abodemic Editorial Standards · Updated June 1, 2026
PMI is required on conventional loans when you put down less than 20%. It typically costs 0.3%–1.5% of the loan per year and cancels automatically once your balance reaches 78% of the home's original value. You can avoid it with 20% down or remove it early by building equity.
What is PMI?
Private mortgage insurance protects the lender — not you — when you buy a home with less than 20% down on a conventional loan. It's an extra monthly cost, typically 0.3%–1.5% of the loan amount per year, added to your payment until you build enough equity.
When does PMI cancel?
By federal law (the Homeowners Protection Act), PMI cancels automatically once your loan balance reaches 78% of the home's original value. You can also request cancellation at 80%. So PMI is temporary — the mortgage calculator shows when it drops off your payment.
How to avoid PMI
- Put 20% down. The cleanest way to avoid PMI entirely.
- Build equity faster. Extra principal payments reach the 78% threshold sooner.
- Refinance once you have 20% equity if rates are favorable.
- Consider a lender-paid PMI structure, which trades PMI for a slightly higher rate — run both to compare.
Is avoiding PMI always worth it?
Not necessarily. Waiting years to save 20% while home prices and rents rise can cost more than the PMI itself. Buying sooner with PMI and cancelling it later is often a reasonable trade — use the calculator to weigh both paths.