Last updated: October 5, 2026
If you buy a home with less than 20% down on a conventional loan, your lender will almost certainly require private mortgage insurance, or PMI. It can add $100 to $200 or more to your monthly payment, and it protects the lender, not you. The good news: unlike some other loan costs, PMI is temporary, and you can often get rid of it years earlier than you think.
This guide explains what PMI is, how much it costs, and the exact rules for removing it, with a worked example on a $400,000 home.
What is PMI?
Private mortgage insurance is a policy that pays the lender part of its loss if you stop making payments and the home is sold in foreclosure. Lenders treat loans with small down payments as riskier, so they require PMI on most conventional loans when the loan-to-value ratio (LTV) is above 80%, meaning you borrowed more than 80% of the home’s value.
You pay the premium, usually as a monthly charge added to your mortgage payment. Less common options include a single upfront premium paid at closing or lender-paid PMI, where the lender covers it in exchange for a higher interest rate.
How much does PMI cost?
PMI pricing depends mostly on your credit score, your down payment and the size of the loan. Freddie Mac estimates that borrowers typically pay about $30 to $70 per month for every $100,000 borrowed. A higher credit score and a bigger down payment push you toward the low end.
Here is what different annual PMI rates mean on a $360,000 loan (a $400,000 home with 10% down):
| Annual PMI rate | Monthly PMI | Total paid until automatic cancellation* |
|---|---|---|
| 0.3% | $90 | $9,810 |
| 0.5% | $150 | $16,350 |
| 0.7% | $210 | $22,890 |
*Assumes a 30-year fixed loan at 6.5% and PMI ending when the balance reaches 78% of the original value (109 payments). Real premiums are quoted by your lender.
When PMI ends: the 80% and 78% rules
The federal Homeowners Protection Act gives you two important rights on most conventional loans for a primary residence:
- 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. You generally need a good payment history, must be current, and may need to show the home has not lost value and that there are no second liens.
- Automatic termination at 78%. If you do nothing, the servicer must cancel PMI when your balance is scheduled to reach 78% of the original value, as long as you are current on payments.
- Final termination at the midpoint. Even if neither threshold is reached (for example, on some loans with special payment structures), PMI must end the month after the midpoint of the loan term, if you are current.
“Original value” usually means the lower of the purchase price or the appraised value when you bought the home.
Worked example: a $400,000 home with 10% down
Suppose you buy a $400,000 home with $40,000 down and a $360,000, 30-year fixed loan at 6.5%. Your principal-and-interest payment is $2,275.44, and PMI at 0.5% a year adds $150 per month.
- 80% of the original value is $320,000. Following the normal schedule, your balance reaches that point after 95 payments (about 7.9 years). That is when you can ask to cancel.
- 78% of the original value is $312,000, reached after 109 payments (about 9.1 years). That is when PMI must end automatically.
- Requesting cancellation at 80% instead of waiting for 78% saves 14 months of PMI, or $2,100.
- Paying an extra $200 per month toward principal from the start gets you to 80% after just 64 payments (about 5.3 years), saving 31 more months of PMI ($4,650) on top of the interest savings.
You can see your own balance at any point in the year-by-year schedule of our mortgage calculator. If amortization is new to you, our guide on how mortgage amortization works explains why the balance falls slowly at first.
Other ways to get rid of PMI
Get a new appraisal
If your home’s value has risen, your loan may already be below 80% of the current value. Many servicers will remove PMI based on a new appraisal, but rules vary: some require you to have owned the home for at least two to five years and to reach a lower LTV, such as 75%, during the first years. Ask your servicer for their exact requirements before ordering an appraisal.
Refinance
Refinancing into a new loan with at least 20% equity also removes PMI, but it comes with new closing costs. It usually only makes sense if you also get a better rate or need to change the loan for another reason.
Put 20% down from the start
Avoiding PMI entirely requires a 20% down payment on a conventional loan. That is not always the best move: waiting years to save more can cost you more than PMI would. Our guide on how much house you can afford shows how down payment size changes your budget.
PMI vs. FHA, VA and USDA mortgage insurance
- FHA loans charge an upfront mortgage insurance premium of 1.75% of the loan and an annual premium paid monthly. With less than 10% down, the annual premium generally lasts for the life of the loan; with 10% or more down, it lasts 11 years. The usual way out is refinancing into a conventional loan.
- VA loans have no monthly mortgage insurance, but most borrowers pay a one-time funding fee.
- USDA loans charge an upfront guarantee fee and an annual fee.
Not sure which loan length fits your budget? Compare the trade-offs in 15-year vs. 30-year mortgage.
Frequently asked questions
How much does PMI cost?
It depends mainly on your credit score, down payment and loan amount. Freddie Mac estimates roughly $30 to $70 per month for every $100,000 borrowed. On a $360,000 loan, an annual rate of 0.5% works out to $150 per month.
When does PMI go away automatically?
Under the Homeowners Protection Act, lenders must automatically end borrower-paid PMI on most conventional loans when the balance is scheduled to reach 78% of the home’s original value, as long as you are current on payments.
Can I remove PMI early?
Yes. You can ask your servicer in writing to cancel PMI once your balance reaches 80% of the original value, either on schedule or sooner through extra payments, if you have a good payment history. Some lenders also allow removal based on a new appraisal if your home has gained value.
Is FHA mortgage insurance the same as PMI?
No. FHA loans charge an upfront premium and an annual mortgage insurance premium (MIP). If you put down less than 10%, FHA MIP generally lasts for the life of the loan; with 10% or more down, it lasts 11 years.
Sources: CFPB: When can I remove PMI from my loan?; Freddie Mac: Breaking down PMI; U.S. Department of Housing and Urban Development (HUD). Example calculations by ToolStackIA.
This article is for educational purposes only and is not financial advice. Loan programs, rates and rules change; confirm details with your lender or a HUD-approved housing counselor.