Mortgage guide · Last reviewed October 15, 2026
PMI Explained: What It Costs, How to Estimate It, and When You Can Drop It
Private mortgage insurance, or PMI, is commonly required on a conventional loan when the down payment is below 20 percent. It can materially change the monthly cost of buying a home.
What PMI is—and what it is not
PMI protects the lender rather than the borrower if a borrower stops making payments and the loan suffers a loss. It does not protect you from job loss, missed payments, foreclosure, or a decline in home value. Read the CFPB explanation of PMI.
- PMI generally applies to conventional loans with an LTV above 80 percent.
- FHA, VA, and USDA loans use different insurance or fee structures.
- PMI can be monthly, upfront, combined, or lender-paid.
What affects PMI cost?
Pricing depends on loan-to-value ratio, credit profile, loan amount, term, occupancy, property, and payment method. An annual PMI rate is commonly multiplied by the loan balance and divided by 12, but a lender's Loan Estimate is the reliable source for an actual borrower.
Illustrative $400,000 home example
These figures use a 30-year fixed loan at 6.50 percent and illustrative PMI rates—not offers or predictions.
| Down | Loan | Principal + interest | PMI/month |
|---|---|---|---|
| 5% | $380,000 | about $2,402 | about $285 |
| 10% | $360,000 | about $2,275 | about $180 |
| 15% | $340,000 | about $2,149 | about $113 |
| 20% | $320,000 | about $2,023 | $0 |
For the 5 percent example, $380,000 multiplied by 0.90 percent equals $3,420 per year, or about $285 per month. Taxes, insurance, HOA dues, and other costs are separate.
When can conventional PMI be canceled?
The CFPB explains the federal PMI cancellation rules for many covered mortgages on a single-family principal residence.
Request at 80 percent
You generally may request cancellation when the scheduled principal balance reaches 80 percent of the home's original value. The servicer may require a written request, good payment history, current payments, no junior liens, and evidence that the property value has not declined.
Automatic termination at 78 percent
In general, the servicer must automatically terminate PMI when the scheduled principal balance reaches 78 percent of original value if the borrower is current.
Midpoint protection
For covered loans, PMI generally must end after the midpoint of the original amortization schedule if the borrower is current. On a 30-year loan, that midpoint is after 15 years. Confirm the rules with the servicer.
Ways to reduce or remove PMI sooner
- Pay extra principal and confirm it is applied correctly.
- Ask the servicer about cancellation near the applicable equity threshold.
- Ask whether an appraisal or improvements can support value-based cancellation.
- Compare refinance costs with expected PMI savings.
- Do not drain your emergency fund solely to avoid PMI.
Checklist
- Ask for the PMI rate, payment method, and cancellation terms in writing.
- Review the Loan Estimate and Closing Disclosure.
- Use the MortgageWise mortgage calculator to compare down-payment scenarios.
- Contact the servicer as you approach the cancellation point.