PMI: Cost, Removal, and Why It Matters
Private mortgage insurance typically costs 0.3–1.5% of the loan balance annually, is required when your down payment is below 20%, and automatically terminates when your equity reaches 22% of the original purchase price — but you can request removal at 20% equity without waiting.
Private mortgage insurance (PMI) typically costs 0.3–1.5% of the loan balance annually, is required when your down payment is below 20%, and automatically terminates when your equity reaches 22% of the original purchase price — but you can request removal at 20% equity without waiting (per the Homeowners Protection Act of 1998, 12 U.S.C. §4901–4910). Use the mortgage calculator to estimate how long until you reach that threshold.
What PMI Is and Who Pays It
PMI is insurance that protects the lender — not you — in the event you default on your mortgage. When you put down less than 20%, the lender faces higher risk of a shortfall if they have to foreclose and sell the property. PMI transfers that risk to an insurance company.
You, the borrower, pay the premiums. The lender benefits. PMI applies to conventional mortgages (not FHA, VA, or USDA loans, which have their own mortgage insurance programs). It is separate from homeowner's insurance, which protects you against property damage and is required by lenders regardless of down payment.
PMI Cost Ranges by Credit Score and LTV
Per Fannie Mae PMI rate matrices and Freddie Mac guidelines, typical annual PMI rates:
| Credit Score | 95% LTV (5% down) | 90% LTV (10% down) | 85% LTV (15% down) |
|---|---|---|---|
| 760+ | 0.41% | 0.25% | 0.17% |
| 720–759 | 0.54% | 0.33% | 0.22% |
| 680–719 | 0.77% | 0.47% | 0.31% |
| 640–679 | 1.10% | 0.67% | 0.44% |
| Below 640 | 1.45%+ | 0.92%+ | 0.59%+ |
Monthly cost on a $380,000 loan (5% down on $400k) at 95% LTV, 720 credit: Annual rate ~0.54%; Annual cost: $380,000 × 0.0054 = $2,052; Monthly cost: $171/month. That $171/month is cash that leaves your pocket and does nothing for your equity.
Three PMI Removal Paths
The Homeowners Protection Act of 1998 (HPA) provides specific rights to remove PMI:
Path 1: Automatic Termination at 78% LTV
Your servicer must automatically cancel PMI on the date your scheduled loan balance reaches 78% of the original purchase price (22% equity based on original value). This is based on the amortization schedule, not actual extra payments. For a $400,000 home, automatic termination triggers when the loan balance reaches $312,000.
Path 2: Borrower Request at 80% LTV
You can request PMI cancellation when your loan balance drops to 80% of the original property value, you have a good payment history, and you are current on the loan. This path requires you to actively ask — servicers do not proactively offer early cancellation. The lender may require an appraisal confirming the property has not declined in value.
Path 3: Refinance
If your home has appreciated significantly, refinancing at a lower LTV eliminates PMI regardless of the amortization schedule. If you bought at $400,000 with 5% down ($380,000 loan) and the home is now worth $500,000, your LTV is 74% — you could refinance into a new loan with no PMI. Refinancing involves closing costs (typically 2–5% of loan amount). The mortgage interest deduction calculator can help model the refinance trade-off.
The 20% Down Decision Tree
Scenario: $400,000 home. Option A: 20% down ($80,000). Option B: 5% down ($20,000), invest the $60,000 difference in index funds at 7% average return.
At 7% annual return, $60,000 invested for 7 years: $60,000 × (1.07)^7 = $96,408. Total PMI paid over 7 years (at 0.54%): ~$14,364.
The math strongly favors investing the 20% down difference rather than using it to avoid PMI — as long as you have the investment discipline and the rate of return exceeds the PMI cost. PMI at 0.54% is less expensive than mortgage interest at 6.5%. That said, this logic breaks down if you cannot earn 7% consistently, if the PMI rate is much higher (low credit score + high LTV), or if carrying PMI creates behavioral friction.
PMI Breakeven Table — Months to Reach 22% Equity via Amortization
Setup: $400,000 purchase price at 6.5% fixed 30-year. Target: 22% equity = loan balance drops to $312,000 (78% LTV).
| Down Payment | Starting Loan | Starting LTV | Months to 78% LTV | Total PMI Paid |
|---|---|---|---|---|
| 5% ($20k) | $380,000 | 95% | ~145 months (~12.1 years) | ~$24,750 |
| 10% ($40k) | $360,000 | 90% | ~103 months (~8.6 years) | ~$15,450 |
| 15% ($60k) | $340,000 | 85% | ~60 months (~5.0 years) | ~$6,120 |
LPMI vs BPMI
Borrower-Paid PMI (BPMI): You pay the monthly premium. It can be removed per HPA rules at 80%/78% LTV. This is the standard structure.
Lender-Paid PMI (LPMI): The lender pays the PMI premium but charges you a higher interest rate — typically 0.25–0.5% higher. The PMI cost is baked into the rate for the life of the loan and cannot be removed by reaching 80% equity. If you plan to hold the loan long-term, LPMI can end up costing more than BPMI.
PMI vs MIP — FHA Mortgage Insurance
FHA loans have their own mortgage insurance called MIP (Mortgage Insurance Premium), which operates differently in two important ways:
- MIP has an upfront premium (1.75% of the loan amount at closing, which can be financed)
- MIP does not automatically fall off for most FHA loans originated after June 3, 2013 — if you put down less than 10%, MIP stays for the life of the loan
A borrower on an FHA loan with 3.5% down will pay MIP indefinitely. The only way to remove it is to refinance into a conventional loan when sufficient equity exists. FHA MIP annual rates range from 0.55% to 1.05% depending on loan term, LTV, and loan size.
Frequently Asked Questions
My servicer hasn't removed my PMI automatically even though I'm at 78% LTV. What can I do?
Contact your servicer in writing and reference the Homeowners Protection Act of 1998. They are legally required to cancel PMI at 78% of the original purchase price if you are current on payments. If they fail to act after written notice, you can file a complaint with the CFPB.
I want to remove PMI early because my home's value increased. What's the process?
Submit a written request to your servicer requesting PMI cancellation based on increased property value. Most lenders require a formal appraisal (at your expense, typically $400–$600). If the appraisal shows your LTV is at or below 80% of the new value, and you have a good payment history, the lender should remove PMI.
Is PMI tax-deductible?
Under prior law, borrower-paid PMI premiums were deductible as a form of mortgage interest. This deduction expired and has not been renewed. As of the 2026 tax year, PMI is generally not deductible.
I have a VA loan. Do I pay PMI?
No. VA loans do not require private mortgage insurance regardless of down payment. They have a one-time funding fee instead (ranging from 1.25% to 3.3% depending on down payment and usage). VA funding fees can be financed into the loan.
Can I get PMI removed before reaching 80% LTV if I've made extra principal payments?
Yes. The HPA bases the 80% LTV calculation on actual outstanding balance, not just the scheduled amortization. If you've made extra principal payments and your balance is below 80% of the original purchase price, you can request removal with documentation.
Estimate Your PMI with the Mortgage Calculator
PMI duration depends on your specific loan amount, rate, down payment, and credit score. The mortgage calculator computes your amortization schedule, shows when you hit 78–80% LTV, and estimates total PMI cost over that period so you can decide whether accelerating paydown is worthwhile.
Related calculators
Mortgage Calculator
Calculate full PITI mortgage payment with FigureCal — principal, interest, taxes, insurance, HOA, PMI. Closed-form amortization formula shown.
Open calculator →Mortgage Interest Deduction Calculator
Estimate mortgage-interest tax savings with FigureCal — $750k debt cap, proration math, every formula shown. Sources from IRS Pub 936.
Open calculator →Property Tax Calculator
Estimate annual and monthly property tax with FigureCal — state effective rates, homestead exemption, full math shown. 50-state coverage.
Open calculator →