When you take out a conventional mortgage loan (not insured by the U.S. government), with a down payment of less than 20%, your lender will require that you pay monthly private mortgage insurance (PMI) which protects the lender in case you default.

PMI costs can vary between 0.58% and 1.86% of the mortgage amount. According to Nerdwallet’s PMI calculator, if you buy a home for $350,000, put down $35,000 or 10% with a 6% interest rate on a 30-year note, and with a credit score of 620 to 639, you’ll pay 1.50% PMI, or $394 per month. It’ll take 7.40 years for your loan balance to get to 80% loan to value (LTV). The earliest you can get a PMI cancellation is two years of ownership and an LTV of 75%.

You can ask your lender to remove PMI when your loan balance reaches 80% LTV. At 78%, PMI should be canceled automatically, but there are steps you can take to get it canceled more quickly.

1. Make extra payments to reduce the principal.

2. Make payments on time—no late payments in the previous 12 months, no
   60-day late payments in the previous 24 months.

3. Don’t have any other liens on the property, including a second mortgage.

4. Show proof of value with a professional appraisal or broker price opinion.

5. Make improvements to the home that add value.

6. Refinance the mortgage and get a home equity line of credit to pay off
   the PMI.

Your Berkshire Hathaway HomeServices Colorado Real Estate Forever AgentSM is always here to help with your real estate needs and questions. Call us at 303-905-8850 or visit BHHScore.com