What is PMI (private mortgage insurance)?

PMI (private mortgage insurance) is insurance that protects your lender — not you — if you stop making payments on a conventional mortgage. It's required when you put less than 20% down on a home purchase. PMI does not benefit the borrower directly; it allows buyers to get a mortgage with less than 20% down. Once you reach 20% equity in your home (through payments, appreciation, or both), you can request PMI cancellation. PMI is automatically removed at 22% equity under the Homeowners Protection Act.

How much does PMI cost in 2026?

PMI typically costs 0.2%–1.5% of the original loan amount per year, depending on your credit score, down payment, and lender. Most borrowers pay 0.5%–1.0% annually. On a $350,000 loan at 0.7% PMI: $350,000 × 0.7% = $2,450/year = $204/month added to your mortgage payment. PMI is generally lower for borrowers with higher credit scores and larger down payments — at 10% down and a 760 credit score, you might pay as little as 0.3%. At 5% down with a 640 score, PMI could be 1.2% or more.

How do I get rid of PMI?

There are four ways to remove PMI: (1) Wait for automatic cancellation — federal law (Homeowners Protection Act) requires lenders to automatically cancel PMI when your loan balance reaches 78% of original purchase price (22% equity); (2) Request cancellation — when you reach 20% equity based on original purchase price, write to your lender requesting PMI removal; (3) Refinance — if your home has appreciated significantly, a new appraisal may show 20%+ equity, and a refinance gets a new loan without PMI; (4) Get a new appraisal — some lenders allow PMI removal after 2 years if an appraisal shows 20%+ equity based on current value.

Is PMI the same as FHA mortgage insurance?

No. PMI is private mortgage insurance on conventional loans and can be cancelled when you reach 20% equity. FHA mortgage insurance premium (MIP) is government-required on FHA loans and lasts for the life of the loan if you put less than 10% down. MIP has two components: 1.75% upfront (added to loan balance) and 0.55% annually. PMI has no upfront component and is only annual. FHA MIP is generally more expensive over the long term because it cannot be cancelled — many FHA borrowers refinance to conventional once they have 20% equity to eliminate it.

Can I avoid PMI with less than 20% down?

Yes — there are several strategies: (1) Piggyback loan (80-10-10) — take a first mortgage for 80%, a second mortgage for 10%, and put 10% down. No PMI on the first mortgage. The second loan has a higher rate but may be cheaper than PMI. (2) Lender-paid PMI (LPMI) — lender pays PMI in exchange for a slightly higher interest rate. No separate PMI charge, but the higher rate lasts the life of the loan even after you'd have qualified for cancellation. (3) VA loan — veterans get 0% down with no PMI at all. (4) USDA loan — 0% down, no PMI (guarantee fee instead). (5) Some credit union first-time buyer products have no PMI.

Private Mortgage Insurance (PMI) 2026 — What It Costs and How to Remove It

Private mortgage insurance (PMI) is required on conventional loans when you put less than 20% down. PMI typically costs 0.2%–1.5% of your loan amount per year — on a $350,000 mortgage at 0.7%, that’s $204/month added to your payment. PMI protects the lender if you default, not you. Under the Homeowners Protection Act, your lender must cancel PMI automatically when your loan balance reaches 78% of the original purchase price.

Quick answer: On a $350,000 loan with 5% down and 0.7% PMI rate: $204/month in PMI. You can request cancellation when you reach 20% equity. Auto-cancellation at 22% equity. To avoid PMI entirely: put 20% down, use a VA/USDA loan, or use an 80-10-10 piggyback loan structure.

PMI Cost Calculator (2026)

PMI rate depends on your credit score and down payment:

Credit Score	5% Down	10% Down	15% Down
760+	0.2–0.4%	0.15–0.3%	0.1–0.2%
720–759	0.4–0.6%	0.3–0.5%	0.2–0.4%
680–719	0.6–0.9%	0.5–0.7%	0.3–0.5%
640–679	0.9–1.2%	0.7–1.0%	0.5–0.7%
Below 640	1.2–1.5%	1.0–1.3%	0.7–1.0%

Monthly PMI cost by loan amount (at 0.7% rate):

Loan Amount	Annual PMI	Monthly PMI
$200,000	$1,400	$117
$300,000	$2,100	$175
$350,000	$2,450	$204
$400,000	$2,800	$233
$500,000	$3,500	$292

When Does PMI Cancel?

Method	Trigger	Your Action Required
Automatic cancellation	Loan balance reaches 78% of original purchase price	None — lender required by law
Borrower request	Loan balance reaches 80% of original purchase price	Written request to lender
Appraisal-based (mid-loan)	Current appraisal shows 20%+ equity (after 2+ years)	Request + appraisal (cost ~$400)
Refinance	New loan based on current value (20%+ equity)	Full refinance

Time to 20% equity through payments (at 6.5%, 30-year loan):

Down Payment	Years to Reach 20% Equity Through Payments Alone
5% down	~10 years
10% down	~6 years
15% down	~3 years

Home appreciation accelerates this timeline. If your home appreciates 5% per year and you put 5% down, you may reach 20% equity in 3–5 years rather than 10.

How to Request PMI Cancellation

Check your loan balance and original purchase price
Calculate equity: (Purchase Price − Loan Balance) ÷ Purchase Price
If at or above 20%, write to your servicer requesting PMI cancellation
Servicer may require: proof of no late payments, no liens on the property, and possibly an appraisal
PMI cancels effective your next payment period

Sample equity calculation:

Original purchase price: $350,000
Current loan balance: $275,000
Equity: ($350,000 − $275,000) ÷ $350,000 = 21.4% → eligible to request cancellation

PMI vs. FHA MIP — Cost Comparison

Feature	PMI (Conventional)	FHA MIP
Upfront cost	$0	1.75% of loan (rolled in)
Annual cost	0.2–1.5%	0.55% (most loans)
Can be cancelled?	Yes — at 20% equity	No (if <10% down)
Based on credit?	Yes — rates vary	No — flat rate
Long-term cost	Lower (cancellable)	Higher (lifetime)

Bottom line: For borrowers with 620+ credit, conventional + PMI is typically cheaper over the full loan life than FHA + MIP because PMI eventually cancels.

Strategies to Avoid or Minimize PMI

80-10-10 Piggyback Loan

First mortgage: 80% of home price (no PMI)
Second mortgage: 10% (HELOC or home equity loan)
Down payment: 10%
Second mortgage rate is higher (~8–9%) but no PMI, and second loan can be paid off quickly

Lender-Paid PMI (LPMI)

Lender absorbs PMI cost in exchange for a higher interest rate (typically 0.25–0.375% higher)
No line-item PMI charge
Rate never comes down even after you’d qualify for PMI removal — costs more over time

VA or USDA Loan

VA loans (veterans/active military): 0% down, no PMI — ever
USDA loans (rural areas): 0% down, no PMI (small annual guarantee fee of 0.35% instead)

Written by WealthVieu

WealthVieu researches and writes data-driven personal finance guides using primary sources including the IRS, Bureau of Labor Statistics, Federal Reserve, and Census Bureau.

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