Reviewed by Jeff Shin, NMLS #1041652. Updated .
Also called: PMI, borrower-paid mortgage insurance.
When PMI is required
Fannie Mae requires mortgage insurance, or another charter-approved credit enhancement, on a conventional loan it buys when the loan-to-value ratio is above 80%, and Freddie Mac has the same requirement. As the CFPB puts it, you may have to buy PMI on a conventional loan with a down payment of less than 20% of the price. The same applies to a conventional refinance when your equity is under 20% of the home’s value. PMI does not stop a foreclosure if you fall behind. It only covers the lender’s loss.
How you pay for PMI
Most borrowers pay a monthly premium added to the mortgage payment. Some pay a one-time premium at closing, and some pay both. An upfront premium may not be refunded if you move or refinance early, so compare the total cost over the years you expect to keep the loan.
When PMI comes off
Under the Homeowners Protection Act, as the CFPB summarizes it:
- You can ask your servicer in writing to cancel PMI on the date your balance is scheduled to fall to 80% of the home’s original value. You need a good payment history, no second liens, and possibly proof the value has not dropped.
- Your servicer must end PMI automatically when the balance is scheduled to reach 78% of the original value, if you are current.
- PMI must also end the month after the loan reaches the midpoint of its schedule, 15 years into a 30-year loan.
Original value means the lower of the sales price or the appraisal when you bought. FHA, VA, and lender-paid mortgage insurance follow different rules.
Related terms
Related on BankPricer
Sources
Definitions on this page are summarized from the agencies that set the rules. Lenders can add stricter requirements. Checked October 7, 2026.
Not sure which of these applies to you?
That is usually the actual question. Send the situation rather than the product name — purchase or refinance, primary or investment, price range, and timeline — and you get the structures that fit, with what each one costs.