PMI (Private Mortgage Insurance) Guide: Cost, Removal, and When to Pay It (2026)
By Wealthvieu · Updated
Private Mortgage Insurance (PMI) is required when you put less than 20% down. It protects the lender (not you) — but understanding it can save you thousands.
Table of Contents
How PMI Costs Are Determined
Factor
Impact on PMI Rate
Credit score
Higher score = lower PMI
Down payment percentage
More down = lower PMI
Loan amount
PMI is a % of loan balance
Loan type
Conventional, FHA, VA each differ
Loan term
30-year vs. 15-year
Property type
Single-family vs. condo
PMI Cost by Credit Score and Down Payment
Monthly PMI per $100,000 Borrowed
Credit Score
3% Down
5% Down
10% Down
15% Down
760+
$30
$25
$18
$12
740-759
$38
$33
$22
$15
720-739
$50
$42
$30
$20
700-719
$63
$55
$38
$25
680-699
$80
$72
$50
$33
660-679
$100
$90
$65
$42
640-659
$125
$110
$80
$55
620-639
$150
$135
$100
$70
Real-World PMI Examples
For a $420,000 home purchase:
Down Payment
Loan Amount
Credit 760+
Credit 700
Credit 660
3% ($12,600)
$407,400
$122/mo
$257/mo
$407/mo
5% ($21,000)
$399,000
$100/mo
$220/mo
$359/mo
10% ($42,000)
$378,000
$68/mo
$144/mo
$246/mo
15% ($63,000)
$357,000
$43/mo
$89/mo
$150/mo
20% ($84,000)
$336,000
$0
$0
$0
Types of PMI
Type
How It Works
Cost
Who Pays
Borrower-paid (BPMI)
Monthly premium added to mortgage payment
0.5-1.5%/year
Borrower (monthly)
Lender-paid (LPMI)
Lender pays PMI; charges higher interest rate
0.25-0.50% higher rate
Borrower (via higher rate, permanent)
Single-premium
One upfront payment at closing
1.5-3.0% of loan
Borrower (lump sum at closing)
Split-premium
Partial upfront + lower monthly
Combination
Borrower (hybrid)
FHA MIP
Required on all FHA loans
0.55%/year + 1.75% upfront
Borrower (often for life of loan)
How to Remove PMI
Automatic Removal (Conventional Loans)
Trigger
LTV Ratio
Action Required
Automatic termination
78% of original value
Automatically removed; no action needed
Borrower-requested removal
80% of original value
You must request in writing
Midpoint of loan term
Any (e.g., year 15 of 30-year)
Automatically removed regardless of LTV
Good payment history required
—
Must be current; no 30-day lates in 12 months
Faster PMI Removal Strategies
Strategy
How It Works
Savings
Extra principal payments
Pay down to 80% LTV faster
Months to years of PMI saved
Home improvements that increase value
New appraisal shows 80%+ equity
Immediate removal
Market appreciation
Rising home values increase equity
Request new appraisal
Refinance with 20%+ equity
New loan without PMI
Also potentially lower rate
Recast mortgage
Make lump-sum payment, recalculate
Lower payment + reach 80% faster
PMI Removal Timeline (Example)
$420,000 home, 5% down ($21K), $399,000 loan at 6.5%:
Payment Schedule
Years Until 80% LTV
Total PMI Paid
PMI Saved by $200/mo Extra
Minimum payments only
9.5 years
~$19,000
—
+$200/month extra
6.5 years
~$13,000
$6,000
+$500/month extra
4.5 years
~$9,000
$10,000
FHA Mortgage Insurance: Different Rules
FHA loans have different (and generally worse) mortgage insurance rules:
Feature
Conventional PMI
FHA MIP
Upfront premium
None
1.75% of loan amount
Annual premium
0.5-1.5%
0.55% (with 3.5% down)
Removable?
Yes (at 80-78% LTV)
Only if 10%+ down and after 11 years
Down payment less than 10%
PMI removable at 80% LTV
MIP for life of loan
Down payment 10%+
PMI removable at 80% LTV
MIP removable after 11 years
Refinance to remove?
Can refinance to lower PMI
Must refinance to conventional to remove
FHA MIP Cost Example
$420,000 home, 3.5% down ($14,700), FHA loan of $405,300:
Cost
Amount
Upfront MIP (1.75%)
$7,093 (rolled into loan)
Annual MIP (0.55%)
$2,268/year ($189/month)
Total MIP over 30 years (if kept)
~$75,000+
Strategy: Refinance to conventional when 20% equity
Saves $45,000+
Should You Put 20% Down to Avoid PMI?
Scenario
Put 20% Down
Put 5% Down + PMI
Winner
Home price: $420K
$84,000 down
$21,000 down
Depends on opportunity cost
Monthly payment (P&I only)
$2,125
$2,540
20% down saves $415/mo
PMI cost
$0
+$100-$220/mo
—
Total monthly
$2,125
$2,640-$2,760
20% down saves $515-$635/mo
Cash remaining to invest
$0 extra
$63,000 invested
At 8%: $63K → $136K over 10 yrs
Break-even
—
—
~7-10 years
Key insight: If you can earn 8%+ investing the $63,000 difference, 5% down + PMI may be financially better — especially since PMI disappears in ~6-10 years. But the lower monthly payment of 20% down provides more security and cash flow.
