What Is Private Mortgage Insurance (PMI)?
Private Mortgage Insurance (PMI) is a type of insurance that protects the lender if you default on your loan. It’s typically required for conventional loans when you put down less than 20%.
How Much Does PMI Cost?
PMI costs 0.5% to 1.5% of the loan amount annually, divided into monthly payments.
| Loan Amount | Estimated PMI Cost (Annual) | Estimated Monthly Cost |
|---|---|---|
| $200,000 | $1,000 - $3,000 | $83 - $250 |
| $300,000 | $1,500 - $4,500 | $125 - $375 |
| $400,000 | $2,000 - $6,000 | $167 - $500 |
When Can You Remove PMI?
- 🏡 Automatic Cancellation – Lenders remove PMI when your loan reaches 78% of the original home value.
- 📑 Request PMI Removal – If you reach 20% home equity, you can ask your lender to remove PMI.
- 🏠 Refinance to Remove PMI – If your home value increases significantly, refinancing could eliminate PMI.
How to Avoid PMI
You can avoid PMI with these options:
- 💰 Put 20% down – No PMI required for conventional loans.
- 🏦 Use a Piggyback Loan – A second loan covers part of the down payment.
- 🎖 VA Loans – Veterans and active-duty military can avoid PMI with VA loans.
Is PMI Worth It?
PMI increases monthly costs, but it allows buyers to purchase homes sooner instead of waiting years to save 20% down.
“PMI is an extra cost, but it helps homebuyers enter the market sooner instead of delaying homeownership.”
— Sarah Thompson, Mortgage Advisor
Frequently Asked Questions
Can I get a loan without PMI?
Yes, putting 20% down or using VA loans can eliminate PMI.
Does PMI go toward my loan balance?
No, PMI protects the lender and doesn’t reduce your mortgage principal.
How long do I have to pay PMI?
Until you reach 20% equity or refinance to remove it.