If you bought a home with less than 20% down, you may be paying Private Mortgage Insurance (PMI). PMI is one of the most misunderstood line items in a monthly payment: it protects the lender, not the homeowner, and it can feel like you’re paying for something you don’t benefit from directly.
The good news: PMI usually isn’t permanent. In many cases you can request it be removed once you’ve built enough equity—or it may be removed automatically when you hit certain milestones. In this 2026 guide, we’ll break down what PMI is, how it’s priced, the step-by-step process to remove it, and how FHA mortgage insurance (MIP) differs so you can make the right plan.
What is PMI (and when is it required)?
PMI is insurance required on many conventional mortgages when your down payment is less than 20% (meaning your loan-to-value ratio is above 80%). Conventional loans are the mortgages backed by Fannie Mae and Freddie Mac, as well as some portfolio loans offered directly by banks and credit unions.
PMI exists because, from a lender’s perspective, a smaller down payment increases risk. If a borrower defaults early in the loan term, the lender may not be able to sell the home for enough to cover the remaining balance, selling costs, and legal expenses. PMI shifts some of that risk to an insurance company.
How much does PMI cost in 2026?
PMI pricing varies a lot—there isn’t one single ‘PMI rate.’ Two buyers with the same loan amount can see very different PMI premiums depending on risk factors. Your premium is usually paid monthly as part of your mortgage payment, though some borrowers choose single-premium or lender-paid options.
The biggest drivers of PMI cost
- Credit score: Higher scores generally qualify for lower PMI.
- Down payment / loan-to-value (LTV): A smaller down payment usually means higher PMI.
- Loan term: 30-year vs 15-year can change pricing.
- Loan type: Fixed-rate vs adjustable-rate may be priced differently.
- Debt-to-income (DTI) and overall risk profile: Some insurers price more aggressively when risk layers stack up.
In practical terms, PMI might feel like ‘just another fee,’ but it’s also a lever: improving your credit score, adjusting your down payment, or choosing a different structure can sometimes reduce PMI significantly.
PMI vs. FHA mortgage insurance (MIP): what’s different?
Many Minnesota buyers compare conventional loans with PMI against FHA loans, which use mortgage insurance premiums (MIP). Both help borrowers buy with smaller down payments—but the rules for how long you pay them are different.
According to Bankrate’s FHA overview, if your down payment is less than 10%, you’ll generally pay FHA mortgage insurance for the life of the loan; if your down payment is 10% or more, FHA mortgage insurance can be eliminated after 11 years. That’s a key planning difference when you’re looking at the long-term cost of an FHA loan.
Because FHA MIP often lasts much longer, many homeowners treat FHA as a stepping-stone: use FHA to buy when it’s the best fit, then refinance into a conventional loan later if it makes financial sense and you have enough equity.
When can PMI be removed? The 80% / 78% / midpoint rules
For many mortgages, the Homeowners Protection Act (HPA) sets out key milestones for ending PMI. The CFPB explains three core triggers:
- You can request PMI cancellation when the principal balance is scheduled to reach 80% of your home’s original value (and you may be able to request earlier if you’ve made extra payments).
- PMI must be automatically terminated when the principal balance is scheduled to reach 78% of the home’s original value, if you are current on payments.
- PMI must also end at the midpoint of the loan’s amortization schedule (for a 30-year loan, after 15 years), assuming you are current.
What does ‘original value’ mean?
This is an important detail that can surprise homeowners. The CFPB notes that ‘original value’ generally means the lower of the purchase price or the appraised value at the time you bought the home. If you refinanced, it’s generally the appraised value at the time of refinance.
Step-by-step: how to remove PMI as soon as you’re eligible
Here’s a practical workflow you can follow—especially if your goal is to remove PMI at 80% rather than waiting for the automatic 78% termination.
1) Find your PMI disclosure and your scheduled dates
When you closed, you should have received a PMI disclosure showing when your balance is scheduled to hit 80% and 78%. If you can’t find it, your loan servicer can provide it.
2) Track your principal balance against the 80% threshold
Look at your mortgage statement (or online portal) and note your current principal balance. Compare it to 80% of the original value. If you’re close, plan ahead—servicers often have a process and timeline.
3) Prepare to meet the servicer’s conditions
The CFPB says your servicer is legally required to grant a cancellation request if you meet certain criteria, including making the request in writing, having a good payment history and being current, certifying there are no junior liens, and providing evidence the property value hasn’t declined (an appraisal may be used).
4) Submit a written request
This is the step that gets missed. Servicers typically want a written request (often there’s a form). Ask what documentation they need and where to send it.
5) Confirm removal and re-check your payment
Once PMI is removed, review your next statement to make sure the PMI line item is gone and your monthly payment reflects the change. Keep a copy of the approval in your records.
Can I remove PMI faster if my home value increased?
Sometimes, yes—but it depends on your loan’s investor and your servicer’s policies. Even when HPA rules are based on the original value, many servicers allow earlier PMI removal based on a new appraisal showing you have at least 20% equity. That often requires the loan to be seasoned (for example, at least two years old) and a strong payment history.
If Minnesota home values have risen since you bought—especially if you also made improvements—you can ask your servicer what their ‘current value’ PMI cancellation policy is and whether an appraisal would help.
Should you refinance to remove PMI?
Refinancing can remove PMI if your new loan is at 80% LTV or lower. But a refinance comes with closing costs and depends heavily on the interest rate you qualify for.
A simple way to think about it: if a refinance would raise your interest rate significantly, it may not be worth doing just to remove PMI. On the other hand, if you can keep the rate similar (or lower), refinancing might reduce your payment by eliminating PMI and restructuring the loan.
Common PMI mistakes to avoid
- Waiting too long: Many homeowners don’t realize they can request cancellation at 80%.
- Assuming appreciation automatically removes PMI: It usually doesn’t unless you request cancellation and meet your servicer’s requirements.
- Forgetting about second liens: A home equity loan or HELOC can complicate cancellation.
- Not budgeting for an appraisal: Some cancellation paths require one.
- Confusing PMI with FHA MIP: The removal rules can be very different.
Bottom line
PMI can feel frustrating, but it often has a clear finish line. If you’re approaching 80% loan-to-value (based on the original value), you can usually request cancellation in writing. If you do nothing, PMI is typically removed automatically at 78%—and there’s also a midpoint backstop for many loans.
If you’re not sure where you stand—or you’re weighing an FHA loan (with MIP) versus a conventional loan (with PMI)—Davis Monroe Financial can help you compare options and map out a plan that fits your timeline.
Call Davis Monroe Financial at (320) 200-2821 or visit www.mydmf.com to review your current mortgage, estimate when PMI could be removed, and explore refinance or purchase scenarios.
Sources
- CFPB PMI cancellation rules (80% request / 78% automatic / midpoint): https://www.consumerfinance.gov/ask-cfpb/how-can-i-cancel-my-private-mortgage-insurance-pmi-en-202/
- Bankrate FHA MIP duration (11 years vs life of loan): https://www.bankrate.com/mortgages/what-is-an-fha-loan/