Private Mortgage Insurance (PMI) is an extra monthly cost added to your mortgage payment when you put down less than 20% on a conventional loan. It protects the lender — not you — if you default. PMI typically costs $50–$200 per month per $100,000 borrowed, adding up to thousands before you can remove it.
When PMI Is Required
| Loan Type | PMI Required? | Notes |
|---|---|---|
| Conventional, <20% down | Yes | Cancellable at 80% LTV |
| Conventional, ≥20% down | No | No PMI needed |
| FHA | Yes (MIP) | Usually for the life of the loan |
| VA | No | Funding fee instead |
| USDA | Yes (guarantee fee) | Upfront + annual fee |
How Much PMI Costs
PMI = 0.3% – 1.5% of original loan amount per year On a $300,000 loan, that is $75–$375/month. Your rate depends on credit score, down payment size, and loan-to-value ratio.
How to Remove PMI
- Automatic termination — PMI must be removed when your loan balance reaches 78% of the original home value (based on the original purchase price).
- Request cancellation at 80% — You can request removal once you reach 80% LTV. You must be current on payments and may need a new appraisal.
- Refinance — If your home has appreciated, a new appraisal at refinance may show ≥20% equity.
- Extra payments — Paying extra principal each month accelerates reaching 80% LTV.
Calculate your PMI removal timeline with the Down Payment Calculator. See how extra payments accelerate equity with the Mortgage Calculator.
Key Takeaways
- PMI is required below 20% down on conventional loans and costs 0.3–1.5% of the loan annually.
- It protects the lender, not you.
- Request removal at 80% LTV — do not wait for automatic termination at 78%.
- FHA mortgage insurance is harder to remove and may last the life of the loan.
- Extra payments and home appreciation are the fastest paths to PMI removal.
Frequently Asked Questions
Is PMI tax deductible?
PMI was tax deductible in some years via Congressional extensions, but this provision has expired and been renewed multiple times. Check the current tax year rules or consult a tax professional for the latest status.
Is it better to pay PMI or wait until I have 20% down?
It depends on your local market and timeline. If home prices are rising fast, buying now with PMI may be better than waiting and paying more later. Calculate the total cost of PMI vs the opportunity cost of waiting using a down payment calculator.
Can I avoid PMI without 20% down?
Some options include VA loans (no PMI), lender-paid PMI (rolled into a higher rate), piggyback loans (80/10/10 structure), and physician or professional loans that waive PMI for qualifying borrowers.