What Is PMI? Private Mortgage Insurance Explained
How PMI works, how much it costs, and how to remove it when you reach 20% home equity.
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Key Takeaways
- 1PMI protects the lender — not you — when down payment is under 20%.
- 2Typical cost: 0.5–1.5% of loan amount per year ($167–$500/month on $400k).
- 3Automatically cancellable at 78% LTV; request removal at 80%.
- 4FHA MIP often lasts the life of the loan — different rules apply.
PMI adds hundreds per month to your mortgage payment if you put less than 20% down. It is one of the biggest hidden costs of homeownership for first-time buyers.
Calculate your full payment including PMI with our mortgage calculator.
How PMI Works
You pay PMI monthly until your loan balance drops to 80% of the home's original value (or current value in some cases). On a $380,000 loan, PMI at 1% costs $317/month.
It does not pay off your mortgage if you default — it only protects the lender.
How to Remove PMI
At 80% equity: request removal in writing. At 78%: lender must auto-cancel. Rising home values may let you remove PMI early via appraisal.
Refinancing is another path if rates dropped and you have 20% equity.
PMI vs Larger Down Payment
Compare total cost: 5% down + 5 years of PMI vs saving for 20% down. Sometimes waiting 12–18 months to save more wins.
See down payment options for the full picture.
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