PMI can add $100–$500/month to your payment. Here's exactly what it costs, when it ends, how to cancel it early, and legitimate strategies to avoid it altogether.
PMI — Key Numbers
0.5%–1.5%
$125–$375/mo
78% LTV
80% LTV
Down payment <20%
Protects lender, not you
What Is PMI?
Private Mortgage Insurance (PMI) is insurance that conventional mortgage lenders require when your down payment is less than 20% of the home's purchase price. It protects the lender — not you — against losses if you default on the loan.
Despite this, PMI enables homeownership with smaller down payments. Without PMI, most lenders would only offer mortgages to buyers with 20%+ down, locking millions of Americans out of homeownership. PMI is the financial mechanism that makes low-down-payment lending possible.
Important distinction: PMI is specific to conventional loans. FHA loans use Mortgage Insurance Premiums (MIP), USDA loans use guarantee fees, and VA loans have a funding fee instead. These are similar in concept but different in cost, structure, and cancellation rules.
How Much Does PMI Cost?
PMI rates depend on your loan-to-value ratio, credit score, loan term, and the specific PMI provider. Typical ranges:
Credit Score
LTV 90–95%
LTV 85–90%
LTV 80–85%
760+
0.17%–0.45%/yr
0.12%–0.32%/yr
0.08%–0.22%/yr
700–759
0.35%–0.65%/yr
0.22%–0.45%/yr
0.15%–0.35%/yr
660–699
0.75%–1.05%/yr
0.55%–0.85%/yr
0.35%–0.60%/yr
620–659
1.1%–1.5%/yr
0.85%–1.25%/yr
0.55%–0.90%/yr
On a $350,000 loan at 5% down (95% LTV) with a 720 credit score: approximately $280–$520/month. Same loan with 10% down: approximately $160–$310/month. This reinforces why putting at least 10% down meaningfully reduces PMI cost.
Under the 1998 Homeowners Protection Act, PMI must be automatically canceled when your loan balance reaches 78% of the original purchase price (based on your original amortization schedule — not market value). No action required on your part.
Borrower-Requested Cancellation at 80% LTV
You have the legal right to request PMI cancellation once your loan balance reaches 80% of the original purchase price. Requirements: a good payment history (no 30-day lates in the past 12 months), demonstration that property value hasn't declined, and sometimes a new appraisal.
Cancellation Based on Current Home Value
If your home has appreciated, you may reach 80% LTV faster than scheduled. To cancel based on current value (not original price), you'll typically need: 2+ years of payment history, a new appraisal (often $400–$700, but worth it), no recent lates, and 25% equity if the home has appreciated due to market gains rather than improvements.
Refinancing
If you refinance your mortgage with 20%+ equity in the new loan, the new loan won't require PMI. This is a common strategy when home values have risen since purchase.
How to Avoid PMI Without 20% Down
Piggyback loan (80-10-10) — First mortgage for 80% of price, second mortgage (HELOC or home equity loan) for 10%, and 10% down. Avoids PMI but the second mortgage has a higher rate. Monthly cost may exceed PMI.
Lender-paid PMI (LPMI) — Lender pays the PMI in exchange for a slightly higher interest rate. No monthly PMI, but you pay the higher rate for the life of the loan (unless you refinance). Best when you'll sell or refinance before you'd normally reach 80% LTV.
VA loan — Eligible veterans can avoid both down payment and PMI with a VA loan. VA funding fee is a one-time cost, not monthly insurance.
USDA loan — No PMI required in eligible rural areas, though USDA does charge an annual guarantee fee (0.35%).
Down payment assistance — Programs that help you reach 20% down eliminate PMI entirely.
Frequently Asked Questions
Request PMI cancellation in writing to your lender once your loan balance is at or below 80% of the original purchase price. Your payment history must be clean (no 30-day lates in the past 12 months). If your home has appreciated, request cancellation based on current appraised value — you'll need a new appraisal and may need 25% equity if appreciation is market-driven. PMI must automatically cancel when you reach 78% LTV based on the original amortization schedule.
The PMI deduction has been available in some years but is not permanent. Congress must periodically renew this deduction. Check with a tax advisor or IRS.gov for the current year's rules, as the availability and phase-out levels change year to year.
PMI (Private Mortgage Insurance) is for conventional loans — it cancels at 80% LTV and is paid to a private insurance company. MIP (Mortgage Insurance Premium) is for FHA loans — it's paid to HUD and for loans with less than 10% down, it lasts for the life of the loan. FHA MIP also includes a 1.75% upfront premium rolled into the loan. USDA and VA have their own versions as well.
Single-premium PMI lets you pay the entire PMI cost upfront (1.5–3% of loan amount) rather than monthly. This eliminates the monthly PMI payment, reducing your DTI and lowering your monthly costs. It makes sense if you have extra cash at closing, plan to stay in the home long-term, and want the lower monthly payment. The seller can sometimes pay single-premium PMI as a seller concession.
Disclaimer: Smart Mortgage Guide provides educational content only. We are not a licensed mortgage lender, broker, or financial advisor. Rates, limits, and program details are subject to change. Always consult with a licensed mortgage professional before making financial decisions.