Private Mortgage Insurance (PMI) is one of the most common “mystery fees” in a monthly mortgage payment. For many Minnesota buyers—especially first-time buyers—it shows up right when you’re trying to balance a down payment, closing costs, and a monthly payment that still leaves room for life.
The good news: PMI is not automatically a life-of-loan cost for most conventional mortgages. Federal rules under the Homeowners Protection Act (HPA) give homeowners clear rights to cancel or terminate PMI once enough equity is built.
In this guide, we’ll break down what PMI is, how lenders decide what it costs, and the most realistic ways to remove it—whether you’re buying now or you already own your home.
What is PMI (and what it isn’t)
PMI is insurance that protects the lender—not the homeowner—if the borrower stops making payments. It’s typically required on conventional loans when the down payment is less than 20% (meaning the loan starts above 80% loan-to-value, or LTV).
PMI is different from:
- Homeowners insurance, which protects your home and belongings.
- Mortgage life or disability insurance, which is optional coverage for the borrower.
- FHA mortgage insurance (MIP), which is a separate program with different rules than PMI.
If your loan has PMI, it usually appears as a separate line item in your monthly payment or on your mortgage statement.
How much does PMI cost in 2026?
PMI pricing varies. It’s based on risk factors that tell the insurer how likely a borrower is to default, and how big the potential loss would be if a foreclosure happened.
The biggest factors that influence PMI cost include:
- Down payment / LTV at closing: Higher LTV usually means higher PMI.
- Credit score: Higher scores typically qualify for lower PMI.
- Loan type and term (30-year vs 15-year), occupancy (primary vs second home), and the size of the loan.
- Whether the PMI is borrower-paid monthly, single-premium, split-premium, or lender-paid (LPMI).
Some borrowers see PMI as “wasted money.” A better way to think about it is: PMI is a tool that can get you into a home sooner with less cash up front. The tradeoff is a monthly insurance cost until you reach the equity threshold to remove it.
When do you have to pay PMI?
You’ll most often see PMI on conventional loans when you put down less than 20%. For example:
- 5% down conventional loan: PMI is very common.
- 10% down conventional loan: PMI is still common, often cheaper than at 5% down.
- 15% down: PMI may still apply but could be relatively low depending on credit score.
There are also scenarios where you might not have PMI even with less than 20% down, such as certain lender-paid structures or special programs. The exact setup depends on your lender options and how you want to balance interest rate vs monthly payment.
How PMI is removed on a conventional loan (the rules that matter)
For most conventional mortgages, PMI can end in three main ways under the federal Homeowners Protection Act (HPA):
1) You request cancellation at 80% LTV
Under HPA rules, a borrower can request PMI cancellation when the principal balance is scheduled to reach 80% of the home’s “original value” (generally the purchase price or the appraised value at closing), or earlier if the principal balance actually reaches 80% based on actual payments.
The request typically needs to be in writing, and the servicer can require that:
- You have a good payment history and are current on payments.
- The home’s value has not declined (sometimes proven via an appraisal or other acceptable evidence).
- You have no subordinate liens, like a second mortgage or HELOC that would reduce your true equity position.
2) Automatic termination at 78% LTV
Even if you never ask, HPA rules generally require PMI to automatically terminate when the loan balance is scheduled to reach 78% of the home’s original value—so long as you are current on the mortgage at that time.
If you are not current when the 78% point arrives, the servicer must terminate PMI once you become current again (typically the first day of the first month after you’re current).
3) Final termination at the midpoint of the loan term (for certain loans)
For certain “high-risk” loans (as defined by the lender or the agencies), HPA also includes a final termination point at the midpoint of the amortization period—again, if the loan is current.
Important note: these rules apply to borrower-paid PMI on many conventional loans. FHA loans use different mortgage insurance rules, and lender-paid PMI structures can work differently. A quick review of your loan type tells you which rules apply.
How to get rid of PMI faster (practical strategies)
If your goal is to remove PMI sooner, you generally have three levers:
1) Pay the balance down faster
Extra principal payments can move you toward 80% or 78% LTV sooner. Even small, consistent extra payments can shave months off the schedule—especially early in the loan when interest takes the biggest bite.
2) Use home appreciation (and an appraisal) to your advantage
In some cases, if your home value has increased, you may be able to request PMI cancellation based on current value rather than the original value. Many servicers will require an appraisal, and they’ll review payment history and lien status as part of the approval process.
This is common in markets where values rose quickly or after you complete improvements that legitimately increase value (new roof, updated kitchen, finished basement, etc.).
3) Refinance (when it makes sense)
Refinancing can remove PMI if the new loan is at or below 80% of the home’s current appraised value. But refinancing only makes sense when the overall math works: interest rate, closing costs, how long you’ll keep the home, and whether you’re resetting the clock on the loan term.
Common PMI mistakes to avoid
Before you call your servicer, watch out for these common pitfalls:
- Assuming PMI ends automatically at 80%: 80% is usually borrower-requested. Automatic termination is typically at 78% if you’re current.
- Forgetting about second liens: A HELOC or second mortgage can block cancellation until it’s paid down or closed.
- Not budgeting for an appraisal: Some servicers require a paid appraisal to confirm value has not declined.
- Mixing up PMI and FHA mortgage insurance: FHA MIP often lasts longer and has different cancellation rules.
PMI vs. FHA mortgage insurance (quick overview)
Many Minnesota buyers choose between a conventional loan with PMI and an FHA loan with mortgage insurance (MIP). FHA can be a great fit for some borrowers, especially with lower credit scores or specific qualification needs. But FHA mortgage insurance is structured differently than PMI and may not be removable the same way without refinancing into a different loan type.
If you’re unsure which route fits you best, comparing the total monthly payment and the long-term cost over the years you expect to own the home is usually more helpful than focusing on the down payment alone.
A simple PMI removal checklist
If you already have PMI and want it gone, here’s a practical checklist:
- Find your original purchase price/appraised value and your current loan balance.
- Estimate your current LTV (loan balance ÷ value).
- Check if you’ve reached 80% (request) or are close to 78% (automatic).
- Confirm you’re current on payments and have a clean recent payment history.
- Check for any subordinate liens (second mortgage/HELOC).
- Call your servicer and ask what documentation they require for PMI cancellation.
- If needed, order an appraisal and submit a written cancellation request.
How Davis Monroe Financial can help
PMI decisions are rarely one-size-fits-all. Sometimes the smartest move is paying PMI for a short period so you can buy sooner. Other times, it’s worth structuring the loan differently—such as choosing a different down payment option, comparing lender-paid vs borrower-paid MI structures, or planning a refinance strategy around your timeline.
If you want help comparing options, Davis Monroe Financial can walk through your numbers and show you scenarios side-by-side—so you can choose the plan that fits your budget and goals.
Call (320) 200-2821 or visit www.mydmf.com to get started.