How to get rid of Private Mortgage Insurance (PMI)

For many homeowners, Private Mortgage Insurance (PMI) is an unavoidable expense when buying a home with a lower down payment, but it doesn’t have to last forever. Eliminating PMI can save you thousands of dollars annually, reduce your monthly mortgage payments, and give you greater financial flexibility. Whether you’re a first-time buyer or a longtime homeowner, this guide will walk you through how to get rid of PMI—and why refinancing with Better could be the simple, fast solution you’re looking for.

What is PMI?

PMI, or Private Mortgage Insurance, is an insurance policy that protects your lender in case you stop making payments on your home. Lenders typically require PMI for conventional loans when a buyer makes a down payment smaller than 20% (learn more about when you need to pay PMI on a conventional loan here. It’s a way for lenders to reduce their financial risk. 

Not sure how much you should put down on a house? Here’s a helpful guide to help you decide whether a larger or smaller down payment makes sense for you. For homeowners, though, PMI means paying an additional monthly fee that doesn’t contribute to your property equity. 

While PMI can help you get into your dream home faster without waiting years to save a 20% down payment, most borrowers prefer to eliminate it as soon as they can.

Understanding the minimum down payment for conventional loans is key when deciding how to minimize PMI. Depending on your financial situation, a 3%, 5%, or 10% down payment might be the best option for you. Learn more about which down payment amount makes the most sense for your situation.

How much is PMI?

PMI costs typically range from 0.3% to 1.5% of the original loan amount annually, which increases your monthly mortgage payment. The exact cost depends on your credit score, down payment, and loan terms.

Can I avoid paying PMI?

You can avoid private mortgage insurance by making a down payment of at least 20% when securing a conventional loan. Some lenders also offer lender-paid mortgage insurance options, but these often result in higher interest rates. The only other means to avoid paying PMI is by getting an FHA loan. 

FHA loans don’t have PMI; they require MIP (mortgage insurance premium) instead. Unlike PMI, MIP remains for the life of the loan unless you refinance into a conventional loan.

When does PMI go away?

The good news is that PMI doesn’t last forever. There are a few ways to stop paying it, based on your home’s equity and loan arrangement.

Automatic PMI termination

Under the Homeowner Protection Act, your lender is required to automatically cancel PMI once your mortgage balance reaches 78% of the home’s original value—assuming you’ve made all mortgage payments on time.

For example, if your home was purchased for $300,000, PMI will terminate when your loan balance reaches $234,000.

Request PMI cancellation

If you’ve built up 20% equity in your home faster—either through payments or rising property values—you can request to cancel your PMI early. This often requires contacting your lender and providing proof, like a home appraisal or an updated balance statement.

To do this, you may need to order a home appraisal through your lender to prove that your home’s value has increased enough to meet the required loan-to-value ratio for cancellation.

Refinancing as a fast track

Sometimes, waiting for your automatic termination date may feel like watching paint dry. Refinancing gives you the option to take control sooner. When you refinance to a new loan with at least 20% equity, PMI can be eliminated immediately.  You can also refinance an FHA loan into a conventional loan to potentially avoid MIP.

How do you get rid of PMI?

There are multiple ways to get rid of PMI. Here are the five most effective strategies:

1. Refinance Your Mortgage

Refinancing is one of the fastest and most efficient ways to eliminate PMI. By switching to a new loan with at least 20% equity, you can skip the PMI fee entirely. Refinancing also allows you to reassess your loan terms, potentially locking in lower interest rates or better monthly payments. Here’s a breakdown of the pros and cons of refinancing.

👉 Interested in learning what the refinance process and timeline looks like? Learn what to expect here.

Why choose Better for refinancing?

Better’s online platform simplifies refinancing. With no hidden fees and a process designed to be completed in as little as three minutes, Better offers a stress-free path to removing PMI while potentially saving thousands. 

....in as little as 3 minutes – no credit impact

2. Request PMI cancellation

Once you reach 20% equity, you have the right to ask your lender to cancel PMI. This often involves submitting a formal request and possibly paying for a home appraisal to confirm your property’s current value. Otherwise, you can pay your loan balance to 80% of the original home value through regular mortgage payments and then request PMI cancellation without needing an appraisal. 

3. Make additional mortgage payments

If your financial situation allows, put extra money toward your loan’s principal to pay it down faster. This reduces your loan-to-value (LTV) ratio, helping you reach the required 20% equity for PMI removal sooner.

4. Utilize rising property values

If your property’s value has appreciated significantly since purchase, your equity percentage may already meet or exceed 20%. Conducting an appraisal to verify this and presenting it to your lender can help you remove PMI early.

5. Shorten your loan term

If you’re financially ready, consider refinancing to a shorter loan term (e.g., from 30 years to 15 years). While this increases your monthly payment, it helps you pay off your balance—and reach the 20% equity mark—much faster.

How do I appraise my home to remove PMI?

To remove PMI, you’ll typically need to prove that your home’s value has increased enough to bring your loan-to-value (LTV) ratio below 80%. You can do this by requesting a professional appraisal through your lender. If the appraisal confirms that your home’s value has risen, you can petition your lender to cancel PMI. Keep in mind that you may have to cover the appraisal fee, which typically ranges from $300 to $500—but the long-term savings from eliminating PMI often outweigh this cost. 

Is getting rid of PMI worth it?

The short answer? Yes. Eliminating PMI can result in significant savings over the life of your loan. For instance, if your PMI costs $150 per month, you’re paying an additional $1,800 annually. Over several years, that adds up quickly.

But there are other benefits too:

• Lower monthly payments: Ditching PMI immediately reduces your monthly housing costs, freeing up funds for other financial goals.
• Improved cash flow: Whether it’s reinvesting in home improvements, saving for retirement, or paying down high-interest debt, those extra savings can be put to better use.

Are there drawbacks?

The main consideration is upfront costs like appraisals if required, or closing costs if refinancing. For example, if you’re looking to sell the home in the near future, paying for an appraisal to remove PMI may not make sense. However, if you’re looking to stay in the home longterm, it might. It’s important to assess your financial situation to determine whether the upfront investment to eliminate PMI is feasible and worth it.

Your path to savings starts now

PMI may be necessary during the early phases of homeownership, but it doesn’t have to stick around forever. Whether you choose to refinance, make extra payments, or leverage rising property values, getting rid of PMI can save you money and give your finances more breathing room.

And remember, if refinancing sounds like the right move, Better makes the process easy and transparent. With no hidden fees or long waiting periods, you can take control of your mortgage—and your financial future—in minutes.

....in as little as 3 minutes – no credit impact