What Is PMI?
Private Mortgage Insurance (PMI) is required by lenders when your down payment is less than 20% of the home's purchase price. It protects the lender (not you) against the risk of default. You pay for it monthly as part of your mortgage payment.
How Much Does It Cost?
PMI typically ranges from 0.3% to 1.5% of the original loan amount per year, depending on your credit score, down payment percentage, and loan type. On a $300,000 loan:
That's $900 to $2,400 per year — real money that builds zero equity.
When Does PMI Go Away?
Under the Homeowners Protection Act, your lender must automatically cancel PMI when your loan balance reaches 78% of the original purchase price (22% equity based on original value, not current value).
You can also request PMI removal at 80% LTV (20% equity), but you may need to pay for an appraisal to prove your home's value.
Important distinction: Automatic cancellation is based on your original purchase price. If your home has appreciated significantly, you may have 20% equity based on current value well before the automatic cancellation date.
Strategies to Eliminate PMI Faster
See Your PMI Timeline
In the Mortgage Modeler, the Equity Milestones card shows exactly which payment number reaches 20% equity and the date PMI drops off. The amortization table highlights the PMI removal row in emerald green.