PMI & Insurance
6 min read
What Is PMI? Private Mortgage Insurance Explained
Mike Starr
Founder, MortgageWizardTools · M.S. Organizational Management
Last reviewed: August 2026
Private mortgage insurance (PMI) is required on conventional loans when your down payment is less than 20%. It protects the lender — not you — if you default. Understanding PMI helps you decide whether to put 20% down or buy sooner with less.
When PMI Is Required
- •Conventional loan with less than 20% down payment
- •Less than 20% equity in the home (if home values decline)
- •PMI is not required on VA or USDA loans (they use different guarantee structures)
- •FHA loans use MIP (mortgage insurance premium), not PMI
How Much PMI Costs
PMI typically costs 0.3% to 1.5% of the original loan amount per year. The rate depends on your credit score, down payment, and loan type.
| Credit Score | Down Payment | Estimated PMI Rate |
|---|---|---|
| 760+ | 5% | 0.38% |
| 700 | 5% | 0.54% |
| 660 | 5% | 0.89% |
| 620 | 5% | 1.26% |
| 760+ | 10% | 0.30% |
| 700 | 10% | 0.41% |
| 660 | 10% | 0.67% |
On a $380,000 loan at 0.55%, PMI costs about $174/month.
How to Remove PMI
Under the Homeowners Protection Act:
- •Request removal at 80% LTV — based on the original purchase price or a new appraisal
- •Automatic termination at 78% LTV — based on the original amortization schedule
- •Refinance — if your home has appreciated enough to reach 80% LTV
How to Avoid PMI
- •Put 20% down — the most straightforward approach
- •Piggyback loan — 80% first mortgage + 10% second + 10% down
- •Lender-paid PMI — lender pays PMI in exchange for a higher rate (never removable)
- •VA or USDA loan — no PMI required for eligible borrowers
Key Takeaways
- •PMI is required on conventional loans with less than 20% down
- •Costs 0.3% to 1.5% of the loan per year based on credit and down payment
- •Can be removed at 80% LTV (request) or 78% LTV (automatic)
- •You can avoid it with 20% down, a piggyback loan, or VA/USDA eligibility
- •Use our PMI Calculator to estimate your cost