If you buy a home in the US with less than 20% down on a conventional loan, you will likely pay PMI, or private mortgage insurance. It protects the lender, not you, if you stop paying your mortgage. Here is what it costs and how to get rid of it.
How PMI works
Lenders see small down payments as riskier. PMI lets them approve your loan anyway. You usually pay it as part of your monthly mortgage payment, although some loans let you pay it upfront or through a slightly higher interest rate.
How much does PMI cost?
PMI often costs roughly 0.3% to 1.5% of the loan amount per year, depending on your credit score, down payment and loan type. On a $300,000 loan, 0.7% would be about $2,100 a year, or $175 a month. Add it to your estimate with our Mortgage Calculator.
How to avoid PMI
- Put down 20% or more on a conventional loan.
- Look at special loan programs. VA loans for eligible service members and veterans do not charge monthly mortgage insurance.
- Check lender-paid options, which remove the monthly PMI but usually raise your interest rate.
- Look into state first-time buyer programs that may help with the down payment.
How to get rid of PMI
- Automatic removal: on conventional loans, PMI generally ends when your balance reaches 78% of the home’s original value, if you are current on payments.
- Request removal: you can usually ask your lender to cancel PMI once your balance reaches 80% of the original value.
- Home value rises: if your home has gained value, some lenders allow removal based on a new appraisal.
- Refinance: refinancing into a new loan with at least 20% equity can remove PMI, but weigh the costs.
PMI vs FHA mortgage insurance
FHA loans have their own mortgage insurance premium (MIP), with an upfront fee and annual premiums. Depending on your down payment, it can last much longer than conventional PMI. Compare both before choosing a loan.
Is paying PMI ever worth it?
Sometimes. Waiting years to save 20% while home prices and rents rise can cost more than PMI. The key is making sure the full monthly payment fits your budget.
How much PMI could you pay? An example
| Home price | Down payment | Loan | mortgage insurance at 0.7%/year |
|---|---|---|---|
| $300,000 | 5% ($15,000) | $285,000 | about $166/month |
| $300,000 | 10% ($30,000) | $270,000 | about $158/month |
| $300,000 | 20% ($60,000) | $240,000 | None |
Actual rates vary by credit score and lender. A higher credit score can significantly lower your mortgage insurance.
How to reach 80% loan-to-value faster
- Make extra principal payments: even $100 a month can shave months off your mortgage insurance period.
- Make one extra payment a year: or pay half your mortgage every two weeks, which adds up to one extra payment annually.
- Put windfalls toward the loan: tax refunds and bonuses can make a big difference.
- Track your home value: if prices in your area rise, ask your lender about removal based on a new appraisal.
See how extra payments change your timeline with our Mortgage Calculator.
Should you wait to save 20%?
Waiting to reach 20% avoids mortgage insurance, but it can take years. During that time, you pay rent and home prices may rise. Compare scenarios with our Rent vs Buy Calculator. For many first-time buyers, buying with 5% to 10% down and removing mortgage insurance later is a reasonable path, as long as the full payment fits the budget and an emergency fund remains.
PMI outside the US
In Canada, mortgages with less than 20% down need mortgage default insurance from CMHC or private insurers, usually added to the loan. In the UK there is no mortgage insurance, but lenders typically charge higher rates for smaller deposits.
Next steps: plan around PMI
Use these steps whether you are about to buy or already paying mortgage insurance.
- Get quotes for mortgage insurance from several lenders; rates vary with credit score.
- Compare the total monthly cost with different down payment amounts.
- Find out when your mortgage insurance will drop off automatically.
- Set a reminder to request removal at 80% loan-to-value.
- Consider small extra principal payments to reach that point sooner.
Knowing your mortgage insurance end date turns it from an open-ended cost into a temporary one.
For official, up-to-date guidance, see the CFPB’s home-buying guide.
Frequently asked questions
Is PMI tax-deductible?
Rules on deducting mortgage insurance have changed over time. Check current IRS guidance or ask a tax professional.
Does PMI protect me?
No. PMI protects the lender if you default. It does not cover your payments if you lose your job.
Can I remove PMI early?
Yes. Once your balance reaches 80% of the original value, you can usually request cancellation. Paying extra toward principal gets you there sooner.
Does PMI go away when I refinance?
If you refinance with at least 20% equity into a conventional loan, the new loan usually has no PMI. Weigh closing costs against the savings.
PMI: key takeaways
- PMI is charged on conventional loans with less than 20% down.
- It often costs 0.3% to 1.5% of the loan per year.
- It usually ends automatically at 78% loan-to-value.
- Request removal at 80%, or pay extra principal to get there faster.
Last reviewed: September 2026. This article is general education, not personal financial, tax or legal advice. Rules, rates and limits change, so check official sources or speak to a qualified professional before making decisions. See our Financial Disclaimer.