Private mortgage insurance, or PMI, is a monthly cost that most conventional-loan borrowers pay when they put less than 20% down. It is one of the most misunderstood parts of a mortgage payment, so it helps to be clear about what it is, who it protects, and how to get rid of it.
What PMI actually is
PMI is an insurance policy that protects the lender if you stop making payments and default. It does not protect you, and it does not pay your mortgage for you. Lenders require it on conventional loans with a loan-to-value ratio above 80% because those loans carry more risk.
When PMI applies
PMI is typically required on conventional loans when your down payment is less than 20% of the home price — that is, when your loan-to-value (LTV) ratio is above 80%. The smaller your down payment, the higher the LTV, and generally the higher the PMI cost.
What PMI costs
PMI is usually priced as a percentage of the loan amount per year, commonly between 0.3% and 1.5%, and added to your monthly payment. The exact cost depends on your credit score, down payment, loan type, and insurer. On a $300,000 loan at 0.8% per year, PMI would be about $200 a month.
How to remove PMI
PMI is not permanent. On conventional loans, you can usually request cancellation once your loan-to-value ratio reaches 80%, provided your payments are current and your home value has not declined. At 78% LTV, the lender is generally required to cancel it automatically. You can also reach the threshold faster by making extra principal payments or through home-price appreciation, which may require a new appraisal.
- Reach 80% LTV to request cancellation (payments must be current).
- Reach 78% LTV for automatic cancellation on many conventional loans.
- Make extra principal payments to reach the threshold sooner.
- Refinance if your home has appreciated enough to push LTV below 80%.
PMI vs. other mortgage insurance
| Loan type | Insurance | Removable? |
|---|---|---|
| Conventional | PMI | Yes, at 80% LTV |
| FHA | MIP (mortgage insurance premium) | Often for the life of the loan, depending on down payment and date |
| VA | Funding fee (upfront) | No ongoing monthly mortgage insurance |
| USDA | Guarantee fee (annual + upfront) | For the life of the loan |
This is why the loan program matters as much as the rate: an FHA loan with a low down payment can carry mortgage insurance for the entire term, while a conventional loan with PMI can shed it once you reach 80% LTV.
Avoiding PMI without 20% down
Some lenders offer "piggyback" loans — a second mortgage for part of the down payment — to avoid PMI, but these come with their own costs and risks. The simplest way to avoid PMI is to reach 20% down, or to plan for its removal once your equity grows. Our PMI Estimator tool shows an approximate range and lets you enter a manual quote to see exactly how it changes your payment.
Estimate Your PMI