Key takeaways
- Conventional lenders typically require PMI when you put down less than 20% of the home's price.
- PMI cost depends mainly on your down payment, credit score and loan amount, and is often charged monthly.
- You can request cancellation at 80% loan-to-value, and it generally ends automatically at 78% of the original value.
- FHA mortgage insurance follows different rules and often lasts much longer than PMI.
In this guide
Private mortgage insurance (PMI) is a policy that protects the lender if you stop paying a conventional mortgage. Lenders usually require it when you put down less than 20%. You pay the premium, usually monthly, until your balance falls to about 78% to 80% of the home's original value and PMI can end.
This guide explains how PMI is priced and paid, how it compares with FHA mortgage insurance, and the fastest ways to remove it.
What private mortgage insurance does
A smaller down payment means the lender has less of a cushion if it has to foreclose and sell the home. PMI shifts part of that risk to a private mortgage insurer, which is what allows lenders to offer conventional loans with as little as 3% to 5% down.
It is important to be clear about what PMI does not do. It does not protect you, pay your mortgage if you lose your job, or cover damage to your home. That is the job of homeowners insurance and your own emergency savings.
How much PMI costs
PMI pricing is set by the insurer and lender, and annual premiums often fall in a broad range of roughly 0.3% to 1.5% of the loan amount. The main factors:
| Factor | How it affects your PMI |
|---|---|
| Down payment / loan-to-value | Smaller down payment means higher premium |
| Credit score | Higher scores usually earn much lower rates |
| Loan amount | Premium is a percentage, so bigger loans cost more in dollars |
| Loan term | Shorter terms may price lower |
| Debt-to-income ratio | Higher DTI can raise pricing with some insurers |
| Occupancy and property type | Second homes and some property types can cost more |
Because PMI raises your monthly payment, it also affects your debt-to-income ratio and how much house you can afford.
How PMI is paid
There are several ways to structure PMI. Not every lender offers all of them.
- Borrower-paid monthly PMI. The most common option. A premium is added to your monthly mortgage payment, and it can be canceled later.
- Single-premium PMI. You pay the whole premium upfront at closing, or finance it into the loan. There is no monthly charge, but if you sell or refinance early, you generally will not get the unused portion back unless the policy is refundable.
- Split-premium PMI. Part is paid upfront and a lower amount monthly.
- Lender-paid mortgage insurance (LPMI). The lender covers the premium in exchange for a higher interest rate. There is no separate PMI line, but the higher rate usually lasts for the life of the loan and cannot be canceled like regular PMI.
Upfront premiums appear in your closing costs, so compare the options on your Loan Estimate.
PMI vs FHA mortgage insurance
PMI applies to conventional loans. Government-backed loans handle this differently, as our guide to types of mortgages explains.
| Conventional PMI | FHA mortgage insurance (MIP) | |
|---|---|---|
| When required | Usually with less than 20% down | On essentially all FHA loans |
| Upfront charge | Usually none with monthly PMI | Upfront premium, typically financed |
| Pricing depends on credit score | Yes, heavily | Much less |
| How long it lasts | Until canceled at 78% to 80% LTV | Often the life of the loan with under 10% down; 11 years with 10% or more down |
VA loans have no monthly mortgage insurance, though they usually carry a one-time funding fee, and USDA loans use upfront and annual guarantee fees.
How to remove PMI
The federal Homeowners Protection Act sets baseline rules for most borrower-paid PMI on conventional loans for a primary residence closed since mid-1999.
Request cancellation at 80%
You can ask your servicer in writing to cancel PMI once your principal balance reaches 80% of the home's original value, either on schedule or by making extra payments. Typically you must:
- Be current, with a good payment history
- Show there are no junior liens, such as a second mortgage or HELOC, on the home
- Possibly prove the value has not fallen, which can require an appraisal
Automatic termination at 78%
If you are current, PMI generally must end automatically when your balance is scheduled to reach 78% of the original value, based on the original amortization schedule. If that has not happened by the midpoint of the loan term, PMI must end then, as long as you are current.
Remove PMI based on current value
If your home has risen in value or you have made improvements, your servicer may allow cancellation based on a new appraisal. These rules come from the loan's investor and servicer, not the federal automatic-cancellation law, and often require the loan to be a certain age and a lower loan-to-value ratio. Ask first, then order the appraisal.
Refinance
Refinancing into a new loan with at least 20% equity can eliminate PMI, and it is a common way to exit FHA mortgage insurance too. Weigh the closing costs and the new rate against your savings; our guide on refinancing to remove PMI covers the math.
Is PMI tax deductible?
Federal treatment of mortgage insurance premiums has changed several times. Recent legislation restored an itemized deduction starting with the 2026 tax year, subject to IRS rules and limits. Whether it benefits you depends on your income and whether you itemize, so talk to a tax professional before counting on it.
The bottom line
PMI makes it possible to buy with less than 20% down on a conventional loan, at a cost that depends mostly on your credit and down payment. Compare how it is structured on each Loan Estimate, track your loan-to-value ratio, and request cancellation as soon as you reach 80% so you are not paying for insurance you no longer need.
Frequently asked questions
How much does PMI cost per month?
Annual PMI premiums commonly fall somewhere around 0.3% to 1.5% of the loan amount, divided into monthly payments, though pricing varies by insurer, lender and borrower. Your down payment and credit score have the biggest influence, so a buyer with a high score and 15% down will usually pay far less than one with a lower score and 3% down. Your Loan Estimate shows your actual quote.
When does PMI go away?
Under federal law, for most conventional loans on a primary residence, you can ask to cancel PMI once your balance is scheduled to reach, or you pay it down to, 80% of the home's original value, if you meet requirements like a good payment history. PMI generally ends automatically when the balance is scheduled to hit 78% of original value, and at the loan's midpoint at the latest if you are current.
Can I remove PMI if my home value goes up?
Often, yes. Many lenders and loan investors will consider removing PMI based on a new appraisal showing enough equity from rising values or improvements, but this is set by your loan's rules rather than the federal automatic-cancellation law. Requirements such as a minimum seasoning period and a lower loan-to-value threshold may apply. Ask your servicer what it requires before paying for an appraisal.
Is it worth putting 20% down to avoid PMI?
Not always. Avoiding PMI lowers your monthly cost, but waiting years to save 20% can mean missing out on building equity, and draining savings for a bigger down payment can leave you without an emergency fund. Many buyers put down less, pay PMI for a limited time and then cancel it. Compare total costs and your cash cushion under each scenario.
Is PMI tax deductible?
Federal law has allowed a deduction for mortgage insurance premiums in some years and not others, and recent legislation brought it back beginning with the 2026 tax year for taxpayers who itemize, subject to rules and limits. Whether it helps you depends on your income and whether itemizing beats the standard deduction, so check with a tax professional.
Official Resources & Further Reading
Use these resources to check current guidance. Requirements and availability may vary by state and provider.
This guide is for general educational purposes and is not individualized financial, legal, tax or insurance advice. Product terms, rates and availability vary by provider and location. How we make money.
