How PMI works
Private mortgage insurance lets you buy with less than 20% down. Here's what it costs, and exactly when you can stop paying it.
Last reviewed October 13, 2026.
What PMI is
Lenders see a small down payment as a bigger risk, so on a conventional loan with less than 20% down they require private mortgage insurance. It protects the lender, not you: if you stop paying and the home is sold for less than you owe, the insurer covers part of the lender's loss. You pay the premium, usually as a monthly amount added to your mortgage payment.
PMI typically costs about 0.3% to 1.5% of the loan a year, depending mostly on your credit score and how much you put down. A higher score and a larger down payment both bring it down.
What it costs on a $400,000 home
At this week's average 30-year rate of 7.40% and a PMI rate of 0.5% a year, with PMI ending automatically at 78% of the home's value:
| Down payment | Loan | PMI per month | Paid for | Total PMI |
|---|---|---|---|---|
| 5% | $380,000 | $158.33 | 12 years, 3 months | $23,275 |
| 10% | $360,000 | $150.00 | 10 years | $18,000 |
| 15% | $340,000 | $141.67 | 7 years | $11,900 |
A smaller down payment costs twice over: a bigger loan means a bigger premium, and it takes years longer to pay the balance down to 78%. Try your own numbers in the mortgage calculator, which shows the month your PMI ends.
When PMI ends
For loans on a primary home taken out since July 1999, the federal Homeowners Protection Act sets three points:
- 80%: you can ask to cancel it. Once your balance reaches 80% of the home's original value, whether on schedule or sooner through extra payments, you can request cancellation in writing. You need a good payment record, and the lender can ask for proof the home hasn't lost value and that there's no second mortgage on it.
- 78%: it ends automatically on the date your original payment schedule reaches 78% of the original value, as long as you're current on payments. Extra payments don't move this date, which is why asking at 80% can end it sooner.
- Halfway through the loan (15 years into a 30-year mortgage), it must end if you're current, even if you haven't reached 78%.
"Original value" is normally the lower of the purchase price and the appraisal when you bought. If your home has gained a lot of value, many lenders will also drop PMI based on a new appraisal, under their own rules, usually after you've owned the home for a few years.
FHA and VA loans are different
FHA loans charge their own mortgage insurance premium (MIP) instead of PMI: an upfront premium plus a yearly one. With less than 10% down, the yearly premium lasts for the life of the loan; with 10% or more down, it lasts 11 years. The usual way out early is refinancing into a conventional loan once you have enough equity, which the refinance calculator can help you weigh up. VA loans have no monthly mortgage insurance; they charge a one-time funding fee instead.
Ways to avoid PMI
- Put 20% down. The simplest route, though it can mean waiting longer to buy.
- Lender-paid PMI. The lender pays the insurance in exchange for a higher interest rate, which you keep for the life of the loan, unlike PMI.
- A second mortgage for part of the down payment (an "80-10-10" loan) keeps the first mortgage at 80%. The second loan usually has a higher rate.
PMI isn't always worth avoiding. Buying sooner with PMI can make sense if prices or rents are rising faster than you could save the difference. The affordability calculator includes PMI when it works out what you can spend.