September 29, 2026 · Real Estate, Explained · Blake Sherwood

What Is PMI? Private Mortgage Insurance, Explained (and How to Remove It)

Facts last verified September 9, 2026.

Private mortgage insurance — PMI — is a monthly premium your lender requires when you put less than 20% down on a conventional loan. It protects the lender, not you, if you stop making payments. The good news: PMI is temporary, and federal law gives you clear rights to remove it once you build enough equity.

How It Works in Massachusetts

Massachusetts buyers follow the same federal rules as buyers everywhere else, because PMI is governed by the Homeowners Protection Act of 1998 (HPA), a federal statute. What makes the North Shore relevant is the pace of appreciation. Values in Beverly, Salem, Danvers, Peabody, and Marblehead have climbed sharply over the past several years, meaning many homeowners who bought with less than 20% down may already have enough equity to request PMI removal — even without making extra principal payments.

When you close on a conventional loan in Massachusetts, the HPA requires your lender to give you a written disclosure at closing showing two dates: when your loan balance will reach 80% of the original purchase price (when you can request cancellation) and when it will reach 78% (when the lender must cancel automatically). Your servicer must also send an annual reminder of these rights for as long as PMI remains on the loan.

When Does PMI Go Away?

PMI goes away in one of three ways. You can submit a written request to cancel once your loan balance reaches 80% of the original purchase price, provided your payments are current and you have no subordinate liens. At 78% — based on the original amortization schedule — your servicer must cancel automatically, without you asking, as long as you are current. There is also a backstop: if you reach the midpoint of your loan term (year 15 on a 30-year mortgage) and PMI has not yet been cancelled, the lender must terminate it at that point regardless of LTV.

Note: the 78% threshold is calculated against the original purchase price, not current market value. If your home has appreciated, you may be able to request cancellation earlier using a new appraisal — see the appreciation path below.

How Much Does PMI Cost Per Month?

For most borrowers, PMI runs between 0.46% and 1.50% of the original loan amount per year, according to the Urban Institute’s Housing Finance Policy Center. On a $500,000 loan — realistic for many North Shore purchases — that works out to roughly $192 to $625 per month. Borrowers with scores of 760 or above typically land near the low end; borrowers in the 620–639 range can pay as much as 1.50%.

Example: $480,000 loan × 0.75% ÷ 12 = $300 per month — money that goes entirely to the lender’s insurer, not toward your equity.

Can I Avoid PMI Without 20% Down?

Yes — several paths exist, each with trade-offs.

Piggyback loan (80/10/10): A first mortgage at 80% LTV, a second mortgage or HELOC for 10%, and 10% cash down. Because the first mortgage stays at exactly 80% LTV, no PMI is required. The second loan carries a higher rate, so confirm the combined payment beats what PMI would cost.

Lender-paid PMI (LPMI): The lender absorbs the insurance cost but charges a permanently higher interest rate. Your monthly payment may be lower, but you cannot cancel the rate the way you can cancel borrower-paid PMI. LPMI makes the most sense if you plan to sell or refinance within a few years.

Government loan programs: Veterans and active-duty service members can use a VA loan, which carries no PMI regardless of down payment. USDA loans, available in eligible rural areas, replace PMI with a lower annual guarantee fee.

The Appreciation Path: Removing PMI Early

If your home’s current market value has increased enough that your outstanding balance is now 80% or less of that new value, you may be able to request PMI cancellation based on appreciation. Here is how it typically works:

Step 1 — Call your servicer first. Ask for their PMI cancellation policy in writing before spending money on an appraisal. Some servicers decline appreciation-based requests within the first two years.

Step 2 — Understand the seasoning rules. Per Fannie Mae guidelines (Selling Guide B7-1-02), the maximum allowable LTV for appreciation-based cancellation is 75% for loans seasoned two to five years, and 80% for loans seasoned beyond five years.

Step 3 — Order a lender-approved appraisal. The lender will specify which appraisal management company to use. Cost typically runs $400–$600 — but if it eliminates $250–$400 per month in PMI, the payback period is often one to two months.

Step 4 — Submit the written request. Include the appraisal report and confirm your payment history is clean. If the appraisal supports the LTV threshold, your servicer is required to cancel PMI.

PMI vs. MIP: The FHA Difference

If you are comparing a conventional loan with PMI to an FHA loan, understand that FHA uses a different insurance structure called the Mortgage Insurance Premium (MIP).

On FHA loans originated with less than 10% down, MIP lasts for the life of the loan. The only way to remove it is to refinance into a conventional mortgage once you have at least 20% equity. For borrowers with credit scores above 680, a conventional loan with PMI is often the better long-term choice because the PMI is removable.

A Note on the 2026 Tax Year

Starting with the 2026 tax year, PMI premiums are once again deductible as mortgage interest for qualifying homeowners who itemize. This change was made permanent by Section 70108 of the One Big Beautiful Bill Act (P.L. 119-21), signed July 4, 2025. The deduction phases out for adjusted gross incomes above $100,000 (above $50,000 for married filing separately). Talk to your tax advisor about whether itemizing makes sense for your situation — this post is not tax advice.

FAQ

Does PMI protect me if I lose my job or can’t make payments?

No. PMI protects the lender, not you. If you default, the insurer reimburses the lender for a portion of its loss. PMI does not make your payments for you or prevent foreclosure.

Can my lender refuse to cancel PMI after I reach 80% LTV?

If your request is based on the original amortization schedule and your payments are current, the HPA requires the lender to honor a written cancellation request at 80% LTV. For appreciation-based requests, lenders have more discretion and can require a seasoning period and a new appraisal. If you believe your servicer is wrongly refusing cancellation, file a complaint with the CFPB at consumerfinance.gov.

How do I know what LTV I am at right now?

Divide your current loan balance (shown on your monthly statement) by the original purchase price. If that number is 0.80 or lower, you may be eligible to request cancellation. If you believe your home has appreciated, divide your current balance by the estimated current value — but lenders will require a formal appraisal, not an online estimate.

Is PMI the same as homeowners insurance?

No. Homeowners insurance covers damage to your property and liability — it protects you. PMI covers the lender against default — it protects the bank. Both are typically required when you have a mortgage, but they are completely separate policies.

If you are buying or selling on the Massachusetts North Shore and want to talk through how PMI fits into your financing picture, reach out to the Sherwood & Company team any time.

Last verified: September 9, 2026. PMI rate range: Urban Institute Housing Finance Policy Center. HPA statutory citations: 12 U.S.C. §§ 4901–4910. Fannie Mae seasoning thresholds: Fannie Mae Selling Guide B7-1-02. PMI deduction reinstatement: One Big Beautiful Bill Act, P.L. 119-21, Sec. 70108 (signed July 4, 2025). AGI phase-out ($100,000 / $50,000 MFS): confirmed per Thompson Greenspon CPA analysis of statutory text. FHA MIP rates: HUD Mortgagee Letter 2023-05, confirmed current August 2026.