Private mortgage insurance can add a noticeable charge to your monthly mortgage payment. A 20% down payment is the simplest way to avoid PMI on a conventional loan, but it is not the only option.
Homebuyers may qualify for a loan with no monthly PMI, use a piggyback loan, or compare lender-paid PMI against borrower-paid PMI. Current homeowners may also remove PMI after they meet certain equity and payment requirements.
This guide explains how PMI works, how to avoid it before closing, and how to remove it from a mortgage you already have.
What Is PMI and When Is It Required?
Private mortgage insurance protects the mortgage lender if a borrower defaults. It does not protect the homeowner, pay the mortgage during a hardship, or prevent foreclosure.
PMI usually applies to conventional loans when the down payment is less than 20% of the purchase price. It can also apply after a conventional refinance when the homeowner has less than 20% equity.
A mortgage preapproval may show an estimated housing payment, but the final PMI charge may not appear until the mortgage lender prepares the Loan Estimate. Check the Projected Payments section to see how PMI affects the monthly payment.
PMI is different from homeowners insurance. Homeowners insurance covers certain property losses and liability claims. PMI covers the mortgage lender. It is also only one form of mortgage insurance, since FHA loans and other government-backed mortgages use different fee structures.
How Much Does Private Mortgage Insurance Cost?
PMI does not have one standard price. The cost may depend on the down payment, credit score, loan amount, loan term, property type, and mortgage insurance plan.
For example, a 0.60% annual PMI rate on a $320,000 mortgage would cost $1,920 per year, or $160 per month.
Most borrowers pay PMI as part of the monthly mortgage payment. Some loans charge an upfront premium at closing. Others combine an upfront charge with monthly premiums. The Loan Estimate and Closing Disclosure show where the charge appears.
Compare the full loan cost rather than the PMI charge alone. Lender-paid PMI may remove the separate monthly charge but raise the mortgage rate.
Private Mortgage Insurance vs. FHA Mortgage Insurance
PMI applies to conventional loans. Government-backed loans use different insurance or guarantee fees. A comparison between an FHA loan and a conventional loan should account for the full monthly payment and the length of time each insurance charge lasts.
| Loan Type | Insurance or Fee | General Rule |
|---|---|---|
| Conventional loan | Private mortgage insurance | Often required below 20% down and may be canceled later |
| FHA loan | Upfront and annual mortgage insurance premiums | Duration depends on the original loan-to-value ratio |
| VA loan | VA funding fee | No monthly mortgage insurance |
| USDA guaranteed loan | Upfront guarantee fee and annual fee | Annual fee generally remains for the loan term |
For many current FHA loans, annual mortgage insurance lasts 11 years when the original loan-to-value ratio is 90% or less. It generally lasts for the mortgage term above 90%. Older FHA loans may follow different rules.
VA-backed loans do not require monthly mortgage insurance. Many borrowers pay a one-time VA funding fee, though some qualify for an exemption.
USDA guaranteed loans use an upfront guarantee fee and an annual fee. For fiscal year 2026, USDA lists a 1% upfront fee and a 0.35% annual fee.
How to Avoid PMI Before Closing
The right strategy depends on your cash reserves, eligibility, credit profile, mortgage rates, and expected time in the home. Ask each mortgage lender for Loan Estimates that use the same purchase price, down payment, and loan term.
Make a 20% Down Payment
A conventional loan generally does not require PMI when the down payment reaches 20%. On a $350,000 home, that means a down payment of $70,000.
A larger down payment also reduces the mortgage balance. Still, keep enough cash for closing costs, repairs, moving expenses, and emergencies. A less expensive home may help you reach 20% without using most of your savings.
Use a VA Loan If You Qualify
Eligible service members, veterans, and some surviving spouses may use a VA-backed loan without monthly mortgage insurance. The mortgage lender still reviews income, credit, debt, and property requirements.
You may pay the VA funding fee at closing or finance it into the mortgage. Check your exemption status first.
Compare Loans With No Monthly PMI
Some mortgage lenders offer conventional loans with a small down payment and no separate monthly PMI charge. These loans may use lender-paid mortgage insurance or a higher mortgage rate instead.
No monthly PMI does not mean no cost. Compare total interest and fees for the years you expect to keep the mortgage. Review several of the best mortgage lenders on the same day because mortgage rates can change.
A low-down-payment mortgage may still require mortgage insurance, so read the program terms.
Consider an 80-10-10 Piggyback Loan
An 80-10-10 loan uses an 80% first mortgage, a 10% second mortgage, and a 10% down payment. The first mortgage stays at an 80% loan-to-value ratio, which can remove the PMI requirement on that loan.
For a $400,000 home, the structure could look like this:
- First Mortgage: $320,000
- Second Mortgage: $40,000
- Down Payment: $40,000
The second mortgage may have a higher rate or separate closing costs. Compare the combined payment against one conventional mortgage with PMI.
How to Remove PMI From Your Current Mortgage
Start with your PMI disclosure and latest mortgage statement. Your mortgage servicer can provide the 80% cancellation date, automatic termination date, and property-value process.
Your loan-to-value ratio compares the mortgage balance with the property value. Federal cancellation rules often use the home’s original value. A mortgage investor may also allow earlier removal based on the current value.
Request PMI Cancellation at 80%
You may ask the mortgage servicer to cancel PMI when the mortgage balance is scheduled to reach 80% of the home’s original value. You may also request cancellation sooner after extra principal payments bring the balance to that level.
The request must usually be in writing. You must have a good payment history and be current. You may need to confirm that no junior liens exist and that the property value has not fallen below its original value.
For a home bought for $300,000, an 80% balance equals $240,000. The original value is generally the lower of the purchase price or original appraisal. A refinance resets the original value to the appraisal used for that refinance.
Pay Extra Toward the Principal
Extra principal payments can move the balance toward 80% sooner. Tell the mortgage servicer to apply the extra amount to principal rather than a future payment.
Check the cancellation requirements before you send a large payment. A lower balance may not lead to immediate removal if you have a recent late payment, a second lien, or another restriction.
Request Removal Based on the Current Home Value
Home appreciation or major improvements may give you at least 20% equity before the scheduled cancellation date. Fannie Mae, Freddie Mac, and other mortgage investors may permit earlier cancellation under their own rules.
Contact the mortgage servicer before you order an appraisal. It may require its own valuation method or a minimum seasoning period. An online estimate is not enough. Get written confirmation that PMI has ended.
Wait for Automatic PMI Termination at 78%
For many covered mortgages, the mortgage servicer must automatically end PMI when the balance is scheduled to reach 78% of the home’s original value. You must be current on the mortgage. Extra payments do not move this scheduled date forward under the federal rule.
PMI must also end after the midpoint of the original amortization schedule in many cases. That point is 15 years on a 30-year mortgage.
Refinance the Mortgage
A refinance may remove PMI when the new appraisal shows at least 20% equity. It can also replace an FHA loan with a conventional loan that does not require PMI.
Compare the new mortgage rate, closing costs, loan term, and monthly savings. A refinance may not make sense when the new rate is higher or the closing costs take years to recover. Review offers from mortgage refinance lenders before you apply.
Common PMI Mistakes to Avoid
PMI decisions can affect the mortgage rate, upfront cash, and long-term cost. Watch for these common errors.
- PMI and FHA Mortgage Insurance: FHA mortgage insurance follows different termination rules.
- Lender-Paid PMI Costs: The mortgage lender may charge a higher mortgage rate.
- Premature Appraisals: The mortgage servicer may reject an appraisal that did not follow its process.
- Home Appreciation Assumptions: You usually need to submit a request and meet the mortgage investor’s rules.
- Refinance Cost Errors: Closing costs and a higher mortgage rate can exceed the PMI savings.
Bottom Line
A 20% down payment is the most direct way to avoid PMI, but it is not always the best use of your cash. Compare each option by its total cost for the years you expect to keep the mortgage.
Current homeowners should check the 80% request date, 78% automatic termination date, current-value options, and refinance costs.
Frequently Asked Questions
Can I get a refund after PMI is canceled?
You may receive a refund if you paid PMI premiums that covered a period after the cancellation date. Your mortgage servicer must return any unearned PMI premiums within 45 days after the coverage ends. Most borrowers who pay PMI monthly will receive only a small refund or no refund at all.
What should I do if my mortgage servicer refuses to remove PMI?
Ask your mortgage servicer to explain the denial in writing and identify each requirement you have not met. Send a written notice of error or request for information if you believe the decision is incorrect. You can submit a complaint to the Consumer Financial Protection Bureau if the issue remains unresolved.
Can gift money help me avoid PMI?
Yes. Gift money may help you reach a 20% down payment and avoid PMI on a conventional loan. The mortgage lender will need to confirm that the funds came from an acceptable donor and do not need to be repaid. Gift-fund rules depend on the loan program and property type.
Is PMI required on a second home or investment property?
It can be. A conventional loan may require PMI when the down payment is less than 20%, but second homes and investment properties often have stricter down payment requirements. The exact rules depend on the mortgage lender, mortgage investor, property type, and loan-to-value ratio.
Is private mortgage insurance tax-deductible?
The federal itemized deduction for mortgage insurance premiums has expired. Tax rules can change, so check the latest IRS guidance or speak with a qualified tax professional before filing your return.
