PMI stands for Private Mortgage Insurance. Despite the name, it doesn't insure you against anything — it protects the lender if you stop paying your loan. It's required on most conventional loans when the down payment is below 20%, because a smaller down payment means more risk for the lender if home values dip and they have to foreclose.
How much does PMI cost?
Typically 0.4%–1.5% of the loan amount per year, split into monthly payments. The exact rate depends on two things:
- Your credit score — better credit means a lower PMI rate, sometimes significantly
- Your loan-to-value ratio — the closer to 20% down you get, the lower the rate; below 5% down typically costs more than 10-15% down
On a $250,000 loan, that's roughly $85 to $310 per month — a meaningful swing based on credit alone, which is one reason it's worth checking your credit before you shop for a mortgage.
How do I get rid of PMI?
Under federal law (the Homeowners Protection Act), your lender must:
- Automatically cancel PMI once your loan balance reaches 78% of the home's original value, as long as you're current on payments
- Allow you to request cancellation yourself once you reach 80%, based on your original payment schedule (or sooner, with a new appraisal showing you've reached 80% through market appreciation or extra principal payments)
A third common path: refinancing once you have enough equity, especially if rates have also dropped since you bought.
PMI vs. other loan types' mortgage insurance
PMI specifically refers to conventional loans. Other programs have their own versions, and they don't all work the same way:
| Loan type | Upfront fee | Ongoing cost | Goes away? |
|---|---|---|---|
| Conventional (PMI) | None | 0.4%–1.5%/yr | Yes, at 78-80% LTV |
| FHA (MIP) | 1.75% of loan | ~0.55%/yr | Often not without refinancing |
| VA (funding fee) | 1.25%–3.3% of loan | None | N/A — no ongoing cost |
| USDA (guarantee fee) | 1% of loan | 0.35%/yr | No, for the life of the loan |
See our full Conventional vs. FHA comparison for more on how these programs stack up overall.
Frequently asked questions
How much does PMI cost?
Typically 0.4%–1.5% of the loan amount per year, depending on your credit score and loan-to-value ratio. On a $250,000 loan, that's roughly $85–$310 per month.
How do I get rid of PMI?
By law, your lender must automatically cancel PMI once your loan balance hits 78% of the home's original value, assuming you're current on payments. You can also request cancellation yourself once you reach 80%, and refinancing once you have enough equity is another common path.
Is PMI the same as FHA mortgage insurance?
No. PMI specifically refers to private mortgage insurance on conventional loans. FHA loans have their own mortgage insurance premium (MIP) structure, which in many cases doesn't go away for the life of the loan without refinancing.