Private Mortgage Insurance: What It Really Costs and How It Ends

What PMI Costs and When You're Stuck With It

Private mortgage insurance, PMI, is the fee a conventional lender charges when a buyer puts down less than 20 percent of the purchase price. The Consumer Financial Protection Bureau states it plainly: once the loan-to-value ratio goes above 80 percent, the lender requires PMI to cover its own risk, not the buyer's. It gets added to the monthly payment and stays there until the loan balance drops far enough.

The cost isn't small talk. Freddie Mac's own homebuyer education site puts typical PMI at $30 to $70 a month for every $100,000 borrowed. Its own worked example: a $200,000 loan with 5 percent down carries PMI of $80.75 a month, based on a 0.51 percent insurance rate. Push the loan size up or the credit score down, and that monthly number climbs from there.

FHA loans work differently, and the difference matters if the down payment is under 10 percent. HUD's own rules, in effect since June 2013, require FHA borrowers with under 10 percent down to pay mortgage insurance premium for the life of the loan. There's no 78 percent cutoff waiting for them at all. That's a different animal from conventional PMI, and it's the reason some FHA buyers refinance into a conventional loan the moment they have enough equity.

The 78% Rule, the 80% Rule, and the Real Math

Two numbers control when PMI ends on a conventional loan, and the Consumer Financial Protection Bureau spells out both. At 80 percent loan-to-value of the home's original value, a borrower can request cancellation in writing, as long as payments are current and there's no second lien on the property. At 78 percent, the servicer has to cancel it automatically, no request needed, again as long as payments are current.

These rules have applied to conventional mortgages closed on or after July 29, 1999, per the Consumer Financial Protection Bureau. On a standard 30-year loan with normal amortization, reaching 78 percent LTV through monthly payments alone takes years, not months, since the first several years of a mortgage payment go mostly to interest. Extra principal payments speed it up. A rising home value can also get a borrower to 80 percent sooner, but a cancellation request based on appreciation usually requires a new appraisal that the borrower pays for.

None of this applies if the mortgage insurance on a loan is actually FHA mortgage insurance premium under a different name. Conventional PMI cancels on the LTV math above. FHA MIP on a loan with less than 10 percent down, per HUD, runs for the life of the loan regardless of LTV, which is exactly why refinancing out of FHA and into conventional is the standard move once there's enough equity to qualify.

If You'd Rather Sell Than Keep Paying It

Waiting years for equity, or paying for a new appraisal and hoping it comes in high enough, isn't the only way to stop a PMI payment. Selling the house pays off the loan entirely, PMI included, the day the sale closes. On a loan carrying Freddie Mac's typical PMI cost of $30 to $70 a month for every $100,000 borrowed, that's real money back starting the day after closing, not after a decade of amortization.

Cash Flow Deals is a Florida real estate investor that locks in a net price for a seller's house before repairs are scoped, using a novation-based, flat-fee process arranged through its licensed FL brokerage partner, Silver Door Realty — not a traditional listing, and not a brokerage itself.

Here's what that looks like in practice for someone who wants the PMI payment gone without a listing sign in the yard:

1. Cash Flow Deals reviews the loan payoff, the current PMI cost, and the home's condition, then locks a net price before any inspection happens.

2. Silver Door Realty, the licensed FL brokerage partner, handles the paperwork and lines up a real end buyer through novation.

3. Closing happens in as little as 10 business days. The existing loan, PMI and all, gets paid off at the closing table, and the monthly premium stops that day.

This is one path, not the only one. A homeowner who can comfortably wait for equity, or who can refinance into a better rate today, might come out ahead doing that instead. Cash Flow Deals fits the seller who wants the PMI payment and the mortgage gone now, not eventually.