PMI Explained: What It Is, What It Costs, and How to Avoid It
If you put less than 20% down on a conventional mortgage, lenders will typically require you to pay Private Mortgage Insurance (PMI). Here's everything you need to know.
What Is PMI?
PMI is insurance that protects the lender (not you) if you default on your loan. It adds to your monthly payment but provides no direct benefit to you as the borrower.
How Much Does PMI Cost?
PMI typically costs 0.5% to 1.5% of your loan amount per year, depending on your down payment and credit score.
| Loan Amount | PMI Rate | Monthly Cost |
|---|---|---|
| $200,000 | 0.8% | ~$133/month |
| $300,000 | 0.8% | ~$200/month |
| $400,000 | 0.8% | ~$267/month |
How to Avoid PMI
- Put 20% down — the simplest solution
- Piggyback loan (80-10-10) — take a second mortgage for 10%, put 10% down
- Lender-paid PMI — lender pays PMI in exchange for a higher interest rate
- VA or USDA loans — no PMI required
How to Remove PMI
Under the Homeowners Protection Act, lenders must cancel PMI when your loan balance reaches 78% of the original purchase price. You can also request cancellation at 80% LTV if you have a good payment history.
If your home has appreciated significantly, you may be able to get a new appraisal to demonstrate you've crossed the 80% LTV threshold sooner.
Calculate Your Total Mortgage Cost
Model different down payment scenarios to see how PMI affects your total cost.
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