Mortgage insurance: what it protects and when it ends

What it is, and whom it protects

The CFPB explains that mortgage insurance lowers the risk to the lender, so you can qualify for a loan you might not otherwise get, but it increases the cost of the loan. Typically, borrowers with a down payment of less than 20 percent of the purchase price pay for it, and it is also typically required on FHA and USDA loans.

The CFPB is clear about the limit: mortgage insurance, no matter what kind, protects the lender, not you. If you fall behind, your credit score could suffer and you can lose your home through foreclosure.

Private mortgage insurance on conventional loans

PMI, the CFPB says, is arranged by the lender and provided by private insurance companies. It usually also applies when refinancing a conventional loan with less than 20 percent equity.

The CFPB lists three ways PMI can be paid: a monthly premium added to your mortgage payment, an upfront premium paid at closing, or a combination of upfront and monthly premiums. Each appears on the Loan Estimate and Closing Disclosure, and the CFPB says most PMI is paid monthly with little or no initial payment. It warns that if you pay upfront and then move or refinance, you might not be entitled to a refund.

Its advice: ask lenders what PMI choices they offer, and ask the loan officer to calculate total costs over a few realistic time frames.

FHA, USDA and VA

According to the CFPB:

• FHA: mortgage insurance is required on all FHA loans and includes an upfront premium and an annual premium paid monthly. The cost is the same regardless of credit score, with a slight increase for down payments under five percent.
• USDA: similar to FHA but typically cheaper, with insurance paid at closing and monthly.
• VA: the VA guarantee replaces mortgage insurance. There is no monthly premium, but there is an upfront funding fee.

For FHA, USDA and VA, the upfront amount can be rolled into the loan, which increases the loan amount and overall cost. Rules for ending FHA and VA insurance differ from PMI; the CFPB suggests contacting your servicer for those questions. See mortgage loan types.

Alternatives the CFPB mentions

The CFPB notes some lenders offer conventional loans with smaller down payments that do not require PMI, usually with a higher interest rate. That can cost more or less than PMI depending on factors including how long you stay. It also suggests that saving for a 20 percent down payment avoids PMI on a conventional loan and could get a lower rate, and it suggests asking a tax advisor whether paying more interest or paying PMI would affect your taxes differently.

None of these is automatically better. The down payment chapter covers the trade-off between a larger down payment and keeping savings after closing.

When PMI can be cancelled

For mortgages on single-family principal residences that closed on or after July 29, 1999, the CFPB explains the legal requirements:

Requesting cancellation at 80 percent. You have the right to ask your servicer to remove PMI on the date the principal balance is scheduled to fall to 80 percent of the original value of your home. That first date should appear on the PMI disclosure form you received with the mortgage. You can ask earlier if extra payments have brought the balance down to 80 percent.

The CFPB lists conditions: your request must be in writing; you must have a good payment history and be current; you may need to certify there are no junior liens such as a second mortgage; and you may need to show the property value has not declined below the original value.

"Original value" generally means the lower of the contract sales price or the appraised value at purchase. If you refinanced, it is the appraised value at refinancing.

Automatic termination at 78 percent. In general, your servicer must automatically end PMI on the date the balance is scheduled to reach 78 percent of the original value, if you are current on payments.

Final termination at the midpoint. The servicer must end PMI the month after you reach the midpoint of the loan's amortization schedule, even if the balance has not reached 78 percent. For 30-year loans, the midpoint is after 15 years.

The CFPB adds that some lenders and servicers may allow removal under their own standards, and that investors such as Fannie Mae and Freddie Mac often have their own guidelines, which cannot be less favorable than the legal ones. If your lender is paying for your mortgage insurance, the CFPB notes that different rules apply.

A simple tracking plan

1. Keep the PMI disclosure with your closing documents.
2. Put the first request date in your calendar.
3. Each year, compare your balance to 80 percent of the original value.
4. If you make extra principal payments, check whether you have reached 80 percent sooner.
5. When eligible, send a written request and keep a copy.

Tax note

Mortgage insurance premiums have had their own tax treatment over the years. For the 2025 tax year, IRS Publication 936 states that the itemized deduction for mortgage insurance premiums has expired. Rules can change for later years; check the current publication for the year you are filing, and see mortgage interest and taxes.

These rules and the CFPB's explanations can change. Check with your servicer and the CFPB's current pages.