Private mortgage insurance, or PMI, is an extra monthly cost on most conventional loans with less than a 20% down payment. It protects the lender, not you, but it is what makes low down payments possible.
What PMI costs
Annual PMI typically runs from about 0.3% to 1.5% of the loan amount depending on your credit score, down payment and loan type. On a $320,000 loan at 0.7%, that is roughly $187 per month. Borrowers with strong credit and larger down payments pay less.
How and when PMI ends
Under the Homeowners Protection Act you can request cancellation once your balance reaches 80% of the original home value, and it must end automatically when you reach 78% if you are current on payments. Faster principal payments or a reappraisal after home values rise can shorten the timeline. FHA loans work differently and often carry mortgage insurance for the life of the loan unless you put at least 10% down.
Ways to avoid it
Put 20% down, use a piggyback second mortgage, choose a lender-paid PMI option with a slightly higher rate, or use a VA loan if you are eligible. Compare total monthly cost, since each option has tradeoffs.
Try the numbers
Use our PMI Calculator to see this in practice. With its default example (Home price: $400,000; Down payment: 5%; Interest rate: 6.5%), it shows monthly pmi: $253. Adjust the inputs to match your situation.
Key takeaways
- PMI is a cost of borrowing with less than 20% down.
- It can be canceled at 80% loan-to-value and ends automatically at 78%.
- Compare avoidance options by total monthly cost.
This article is for general education and is not personalized financial, tax or legal advice. Rules and limits change; confirm current figures with official sources such as IRS.gov, SSA.gov and StudentAid.gov, or consult a qualified professional. © 2026 FinanzCalc.