What Is PMI (Private Mortgage Insurance)?
Last updated September 2026
Quick answer
PMI is insurance most conventional lenders require when your down payment is under 20% — and it protects the lender, not you, if you default. On a $400,000 home with 10% down ($360,000 loan), PMI typically runs around $165 a month on top of principal and interest. It's not permanent: you can request cancellation once your loan hits 80% loan-to-value, and by law it must automatically terminate at 78% LTV.
The example we'll use throughout
Every number below comes from the same purchase, so you can compare directly:
| Home price | $400,000 |
|---|---|
| Down payment | 10% ($40,000) |
| Loan amount | $360,000 |
| Rate / term | 6.25% fixed, 30 years |
| Monthly principal & interest | $2,216.58 |
| Estimated PMI | $165/month |
| Total monthly (P&I + PMI, before taxes/insurance) | $2,381.58 |
That $165 doesn't sound like much on its own. Stretched over the years it typically takes to age off, it adds up to real money — shown further down.
What PMI actually costs
PMI isn't a flat fee — it scales with how much you're borrowing relative to the home's value. Here's the same $400,000 home at different down payment levels:
| Down payment | Down % | Loan amount | Approx. PMI rate | PMI/month |
|---|---|---|---|---|
| $12,000 | 3% | $388,000 | 0.82% | $265 |
| $20,000 | 5% | $380,000 | 0.68% | $215 |
| $40,000 | 10% | $360,000 | 0.55% | $165 |
| $60,000 | 15% | $340,000 | 0.44% | $125 |
| $76,000 | 19% | $324,000 | 0.37% | $100 |
| $80,000 | 20% | $320,000 | — | $0 |
Notice the cliff at 20% down — not a gradual taper, a full stop. Actual rates vary by lender and credit score; Freddie Mac cites a typical range of $30 to $70 per month for every $100,000 borrowed, and the figures above sit inside that range assuming good (not exceptional) credit.
How PMI is calculated
The number that drives everything is loan-to-value (LTV) — your loan balance divided by the home's value:
$360,000 loan ÷ $400,000 home value = 90% LTV
$360,000 × 0.55% = $1,980/year
$1,980 ÷ 12 = $165/monthThe part that surprises people:
your premium is set as a dollar amount at closing, based on your original loan balance, and it stays flat every month from there. It does not shrink on its own as your balance goes down, the way your interest does. Your LTV falls a little every month; your PMI bill does not — until you, or an automatic legal trigger, actually removes it.
When PMI goes away
| Requested cancellation | Automatic termination | |
|---|---|---|
| Threshold | 80% LTV | 78% LTV (by law) |
| On our example | ~7 yrs 8 mos in | ~8 yrs 10 mos in |
| Requires | Written request, good payment history, sometimes a new appraisal | Nothing — happens automatically if you're current on payments |
On our $360,000 example, doing nothing but making scheduled payments means paying roughly $17,400 in PMI before it automatically drops off around year nine. Extra principal payments or a rise in your home's value can pull both of those dates significantly earlier. How to Remove PMI From Your Mortgage walks through the request process step by step.
PMI vs. FHA's MIP — not the same thing
FHA loans don't use PMI — they use MIP (mortgage insurance premium), and the rules are meaningfully worse for the borrower. FHA charges an upfront premium (1.75% of the loan, usually rolled in) plus an ongoing annual premium. The cancellation rules differ sharply by down payment: put down 10% or more and MIP cancels after 11 years; put down less than 10% and MIP lasts for the entire loan term — refinancing into a conventional loan is the only way out early. See FHA vs. Conventional Loan for the full comparison.
Things to consider
- Buying sooner has its own value. PMI is the price of not waiting years to save 20% — and home prices and rents don't pause while you save.
- The tax treatment just changed. PMI is deductible again starting with tax year 2026, after a lapse since 2021 — see the FAQ for the details and income limits.
- Credit score moves the price a lot. The gap between a 680 and a 760 credit score can roughly double or halve your PMI rate. Shop more than one lender.
- Lender-paid PMI (LPMI) is a trade, not a discount. The lender covers PMI in exchange for a permanently higher interest rate — you can't cancel it later the way you can borrower-paid PMI, even after you cross 80% LTV.
- Compare it to the alternative directly. See 20% Down Payment vs. PMI for the side-by-side cost of waiting to save the full 20%.
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Frequently asked questions
Is PMI the same as homeowners insurance?
No. Homeowners insurance protects you against property damage. PMI protects the lender if you default — it does nothing for you directly, even though you're the one paying for it. They're separate policies, sometimes billed through the same escrow account.
Is PMI tax deductible?
Not for tax years 2022 through 2025 — that deduction expired. Starting with tax year 2026 (the return you file in 2027), PMI and FHA MIP are permanently deductible again as qualified residence interest, under the One Big Beautiful Bill Act. You need to itemize, and the deduction phases out between $100,000 and $110,000 in AGI (zero above $110,000). Talk to a tax professional about your specific situation.
Can I get a conventional loan with less than 20% down and avoid PMI entirely?
Rarely, and not for free. Lender-paid PMI (LPMI) folds the cost into a higher interest rate instead of a separate line item — you're still paying for it, just less visibly, and you lose the ability to cancel it once you build equity.
Does PMI protect me if I lose my job or can't make payments?
No. PMI pays the lender's losses if your loan goes to foreclosure. It doesn't pause your payments, forgive anything, or show up as a benefit to you anywhere — it exists purely to make the lender comfortable approving a low-down-payment loan.
How much does PMI typically cost?
Freddie Mac estimates $30 to $70 per month for every $100,000 borrowed, depending mostly on your down payment size and credit score. On a $360,000 loan (our example), that range works out to roughly $108–$252 a month; our 0.55% rate assumption lands at $165.
Related guides
FHA vs. Conventional Loan: Which Is Right for You?
Five ways to finance the same home compared — and why your credit score, not the headline rate, usually decides which loan wins.
Read more20% Down Payment vs. PMI: Which Costs You Less?
Buying now with PMI versus waiting to save 20% — and why appreciation can move the target faster than you save.
Read moreHow Much Should You Put Down on a House?
Every down payment option from 0% to 20%, side by side, with the monthly cost of each.
Read moreHow to Remove PMI From Your Mortgage
The 80% and 78% LTV triggers, how extra payments pull them forward, and how to submit the request.
Read moreFigures on this page are generated from the same amortization engine that powers the MortMetrix dashboard, using the example loan stated in each table. They are estimates based on a fixed-rate loan at a constant rate and are not your actual loan terms. This is educational information, not financial advice.