Private Mortgage Insurance (PMI) Explained

PMI protects the lender if you default—but you pay for it. Here's how it works and how to get rid of it.

What Is PMI?

Private Mortgage Insurance is required on conventional loans with less than 20% down payment. It protects the lender, not you.

How Much Does PMI Cost?

PMI typically costs 0.5% to 1.5% of the loan amount annually.

Loan Amount	Annual PMI	Monthly PMI
$200,000	$1,000-3,000	$83-250
$300,000	$1,500-4,500	$125-375
$400,000	$2,000-6,000	$167-500

Factors affecting PMI cost:

Credit score (higher = lower PMI)
Down payment percentage
Loan type
Loan term

Ways to Pay PMI

Monthly PMI

Most common
Added to mortgage payment
Easiest to cancel later

Single Premium (Upfront)

One-time payment at closing
Lower overall cost if staying long-term
Not refundable if you move/refinance

Lender-Paid (LPMI)

Built into higher interest rate
No separate PMI payment
Can't be removed later

How to Avoid PMI

Put 20% down - No PMI required
VA loan - No PMI ever
Piggyback loan - 80/10/10 structure
LPMI - Higher rate, no separate payment

How to Remove PMI

Automatic Termination

PMI must be removed when:

Balance reaches 78% of original value
You reach midpoint of loan term

Request Removal at 80%

You can request removal when:

Balance reaches 80% of original value
Good payment history (no 30-day lates)
No second mortgages

Early Removal with Appreciation

If your home value increased:

Get new appraisal
If LTV is below 80%, request removal
Lender may require 2 years of payments first

PMI vs MIP (FHA)

	PMI (Conventional)	MIP (FHA)
Required if	<20% down	Always
Can be removed	Yes	Usually no*
Cost	0.5-1.5%	0.55-1.05%
Upfront fee	Optional	1.75%

*FHA loans after 2013 require MIP for life unless 10%+ down

Calculate your payment with PMI

Affiliate Disclosure: AmCalc may receive compensation from partner lenders.

Buyer Basics Thursday: Private Mortgage Insurance (PMI): Everything You Need to Know