What Is PMI (Private Mortgage Insurance)? (2026)
PMI, or Private Mortgage Insurance, is an extra monthly cost you pay when you put down less than 20% on a conventional home loan. The key thing to understand: PMI protects the lender, not you, in case you default. It is the price of buying with a smaller down payment, and the good news is that it does not last forever.
Why lenders require it
A smaller down payment means more risk for the lender. PMI offsets that risk, which is why it kicks in below the 20% equity threshold. Once you own enough of the home, the risk drops and PMI goes away.
How much PMI costs
PMI typically runs 0.3% to 1.5% of the loan amount per year, depending on your down payment and credit score. On a $300,000 loan that is roughly $75 to $375 per month. A higher credit score and a larger down payment both lower the rate.
| Credit score | Approx. annual PMI rate |
|---|---|
| 760+ | ~0.3% |
| 700–759 | ~0.5% |
| 660–699 | ~0.9% |
| 620–659 | ~1.3%+ |
How to get rid of PMI
This is the most important part, PMI is temporary:
- Automatic cancellation: by law, PMI ends when your loan balance reaches 78% of the original value (assuming you are current on payments).
- Request removal at 80%: you can ask your lender to drop PMI once you hit 80% LTV (20% equity), sooner than automatic cancellation.
- Appraisal for appreciation: if your home’s value has risen, a new appraisal can prove 20%+ equity and remove PMI early.
FHA loans are different
FHA loans charge MIP (Mortgage Insurance Premium) instead of PMI. The catch: if you put less than 10% down on an FHA loan, MIP lasts for the life of the loan, you cannot cancel it the way you can with conventional PMI. Many buyers refinance to a conventional loan once they have 20% equity specifically to escape MIP.
How to avoid PMI entirely
- Put 20% down.
- Use a piggyback loan (an 80-10-10 structure) to keep the first mortgage at 80%.
- Choose lender-paid PMI (rolled into a higher interest rate instead of a monthly fee).
- Use a VA loan (military), which requires no PMI even with 0% down.
Bottom line
- PMI applies on conventional loans with under 20% down and protects the lender.
- It costs roughly 0.3% to 1.5% of the loan per year and is cancellable at 80% equity (automatic at 78%).
- FHA’s MIP often lasts the life of the loan, a key reason to refinance later.
Estimate your PMI with our PMI calculator and your full payment with the mortgage calculator. This article is general information, not financial advice.
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Rakesh Choudhary, PhD · Founder & Editor
Rakesh Choudhary, PhD, is the founder of Calcinum. A sociologist by training, he builds every calculator on the site and maintains its 2026 federal and state tax data, sourced from primary references (IRS, SSA, state revenue departments, DFAS) and re-verified whenever the law changes. Tax data is sourced from primary references (IRS, state revenue departments, SSA, DFAS) and re-verified annually each tax year.
Editorial standards: Every article cites primary sources and is reviewed against current tax-law data before publication. See our full methodology & accuracy for sourcing and review process.
Not financial advice: This article is for general informational purposes only. Calcinum does not provide regulated tax, legal, or investment advice. Consult a qualified professional for decisions specific to your situation.