Is getting rid of PMI worth it?

Yes, you should remove private mortgage insurance (PMI) as soon as you qualify because it saves you money every month without providing any benefit to you. PMI only protects the lender if you stop making payments.

Review the Consumer Financial Protection Bureau Guide to understand your legal rights regarding cancellation.

How to Know If You Qualify

• 80% Loan-to-Value (LTV): You can request cancellation in writing when your loan balance drops to 80% of your home's original value (or current appraised value).
• 78% LTV (Automatic): Lenders must cancel PMI automatically when your balance reaches 78% of the original value, provided you are current on payments.
• Good Payment History: You need a clean record with no late payments in the past year.

Ways to Remove PMI

• Pay Down the Principal: Make extra payments until your loan balance reaches the 80% threshold.
• New Appraisal: If your home value has increased due to market appreciation or home improvements, pay for a new appraisal to prove you have 20% equity.
• Refinance: Replace your current loan with a new one if home values rose significantly or interest rates are favorable.

Read the Bankrate PMI Breakdown for more details on costs and calculation methods.

For a $400,000 house, you can expect to pay between $95 and $365 per month in Private Mortgage Insurance (PMI), depending on the size of your down payment.

Estimated Monthly PMI Costs

• 5% down payment ($20,000): About $365 per month
• 10% down payment ($40,000): About $234 per month
• 15% down payment ($60,000): About $95 per month
• 20% down payment ($80,000): $0 per month (PMI is not required)

Key Factors That Change the Price

• Credit Score: Higher scores (760+) get lower rates, while lower scores (620–639) pay much more.
• Loan Type: Conventional loans require PMI for down payments under 20%. Government loans like VA loans do not require PMI.
• Total Loan Amount: Rates typically range from 0.2% to 1.5% of the original loan balance each year.

You can check official estimates tailored to your situation using the Freddie Mac PMI Calculator.

Private mortgage insurance (PMI) on a conventional loan typically goes away in about 2 to 11 years, depending on how fast you pay down your mortgage or if your home increases in value.

Key Milestones for Removal

• Year 2 to 7 (Estimated): You can request early cancellation in writing the moment your loan balance reaches 80% of your home's original value (20% equity), provided you have a good payment history. Many homeowners reach this point through regular payments and local market appreciation within a few years.
• Year 11 (Automatic at 78%): By federal law under the Homeowners Protection Act, your lender must automatically cancel PMI when your principal balance is scheduled to hit 78% of the original value (22% equity), assuming your payments are current.
• Year 15 (Loan Midpoint): If you have a standard 30-year mortgage and haven't hit the 78% balance threshold yet, the lender must cancel PMI at the 15-year midpoint of your loan term.

How to Make PMI Go Away Faster

• Request a new appraisal: If your home's value has risen due to renovations or a hot housing market, you can ask your servicer to drop PMI early based on the new, higher current market value.
• Make extra principal payments: Paying extra cash directly toward your loan principal speeds up the timeline to reach that 80% equity mark.
• Refinance: If interest rates drop or your property value surges, refinancing into a brand-new conventional loan without PMI is a popular option.
  (Note: Government-backed FHA loans operate under different rules, where mortgage insurance often lasts for the entire life of the loan if you put down less than 10%).

You should only refinance to get rid of private mortgage insurance (PMI) if your new interest rate is lower or equal, and your home's equity has reached 20% based on a current appraisal.

When Refinancing Makes Sense

• Lower Interest Rates: Refinancing lowers your total housing cost if current market rates are lower than your existing loan.
• FHA to Conventional: If you have an FHA loan, mortgage insurance (MIP) usually never drops off automatically. Refinancing to a conventional loan is often the only way to eliminate it once you hit 20% equity.
• Significant Home Appreciation: If your home value has shot up due to market growth or major renovations, a new appraisal can prove you have 20% equity faster than your regular payment schedule.

Why You Might Avoid Refinancing

• High Closing Costs: Refinancing fees typically cost between 2% and 5% of your loan amount. If these costs outweigh the monthly PMI savings over the time you plan to stay in the home, it is a losing financial move.
• Higher Interest Rates: If current market rates are higher than your current mortgage, a new loan could increase your monthly interest payment by more than you save by dropping PMI.
• Alternative Options Exist: If you have a conventional loan, you do not need to refinance to drop PMI. You can simply request a cancellation in writing once your principal balance drops to 80% of the home's original value, or wait for automatic termination at 78%. You can also ask your U.S. Bank or Rate loan officer about a home appraisal or loan modification.

An appraisal to remove Private Mortgage Insurance (PMI) typically costs between $300 and $600, though fees can range from $350 to $800+ depending on your location, property type, and the specific valuation method required by your lender.

Cost Breakdown by Valuation Type

Depending on your mortgage investor (Fannie Mae or Freddie Mac) and lender guidelines, you might not need a traditional full appraisal:

• Full Interior/Exterior Appraisal: $450 – $800. This is the most common requirement. A licensed appraiser visits your home, takes measurements, reviews upgrades, and analyzes local neighborhood data.
• Broker Price Opinion (BPO): $150 – $190. A real estate professional performs a streamlined valuation based on recent neighborhood sales. Many lenders accept this instead of a full appraisal if you have owned the home for a few years.
• Automated Valuation Model (AVM): Free – $100. Some lenders can use data-driven algorithms paired with property photos to wave standard fees entirely if local home appreciation is clearly established.

Important Guidelines Before You Pay

• Do not hire your own appraiser: You must contact your mortgage servicer first to request the PMI removal process. By law, lenders must maintain independence and will order the appraisal directly through an appraisal management company (AMC) on your behalf. If you hire your own independent appraiser, the lender will likely reject the report, and you will have to pay for a new one.
• Check the "Seasoning" requirements: If you are relying on home appreciation to drop PMI, rules dictated by Fannie Mae and Freddie Mac usually require you to wait 2 to 5 years after closing. If you've owned the home for 2 to 5 years, you typically need to prove a 75% or lower Loan-to-Value (LTV) ratio. If it has been more than 5 years, an 80% LTV is standard. The 2-year waiting period is only waived if you have made significant structural renovations since purchasing the home.
• Calculate the ROI: If your PMI is $150 a month, a $450 appraisal pays for itself in just three months. However, if your loan is naturally on track to hit 80% LTV via your standard monthly principal payments in the next few months, paying for an appraisal may not be worth the out-of-pocket cost.