Last updated: October 2026 · Written and reviewed by Ferran Pujol Acosta, real estate agent. Official sources are listed at the end of this article.
Private mortgage insurance, or PMI, is the extra monthly cost many first-time buyers pay when they put less than 20% down on a conventional loan. It is not a penalty, and it is not permanent. Understanding how it works can save you money and help you decide how much to put down.
What Is PMI?
According to the CFPB, PMI is “a type of mortgage insurance you might be required to buy if you take out a conventional loan with a down payment of less than 20 percent of the purchase price.” The CFPB is clear about who it protects: “PMI protects the lender—not you—if you stop making payments on your loan.”
How PMI Is Paid
- Monthly premium: “the most common way to pay for PMI,” added to your mortgage payment (CFPB).
- Upfront premium: a one-time payment at closing. If you move or refinance later, you might not get a refund (CFPB).
- Both: some loans combine an upfront and a monthly premium (CFPB).
How Much Does PMI Cost?
There is no single official rate: the premium depends on your credit score, down payment and the insurer. The table below uses an illustrative 0.6% of the loan per year to show the order of magnitude on a $350,000 home. Your lender’s Loan Estimate will show your real figure.
| Down payment | Loan amount | PMI per month (at 0.6%/year) |
|---|---|---|
| 3% ($10,500) | $339,500 | About $170 |
| 5% ($17,500) | $332,500 | About $166 |
| 10% ($35,000) | $315,000 | About $158 |
| 20% ($70,000) | $280,000 | $0 (no PMI) |
How to Get Rid of PMI
Federal rules explained by the CFPB give you three ways out:
| Rule | When | Conditions |
|---|---|---|
| Request cancellation | When your balance is scheduled to reach 80% of the home’s original value | Written request, good payment history, current on payments, no junior liens, and the property value has not declined |
| Automatic termination | When your balance is scheduled to reach 78% of the original value | You must be current on payments |
| Final termination | The month after the midpoint of your loan’s amortization schedule (15 years on a 30-year loan) | You must be current on payments |
Example: on a $300,000 home bought with 5% down ($285,000 loan) at 7.28%, Freddie Mac’s average 30-year rate on October 1, 2026, the balance is scheduled to reach 80% of the original value ($240,000) after about 133 payments, roughly 11 years, and 78% ($234,000) after about 145 payments, roughly 12 years. Extra principal payments get you there sooner.
PMI vs FHA Mortgage Insurance
FHA loans use a different system, set by HUD: an upfront premium of 1.75% of the base loan plus an annual premium. If you borrow more than 90% of the home’s value, the FHA annual premium lasts for the whole loan term; if you borrow 90% or less, it lasts 11 years. Conventional PMI, by contrast, can be cancelled under the rules above. VA purchase loans have no PMI or mortgage insurance premiums at all (VA). Compare the options in FHA vs Conventional Loans.
Should You Wait Until You Have 20% Down?
Not necessarily. Waiting avoids PMI but can take years. The CFPB notes that mortgage insurance adds to your monthly costs, so you may need to lower your target price if you put less than 20% down. Compare the extra monthly cost of PMI with how long it would take you to save the rest, and keep an emergency cushion of three to six months of expenses after closing.
Final Thoughts
PMI is the price of buying sooner with a smaller down payment. It protects the lender, it shows up in your monthly payment, and on a conventional loan it is designed to end. Know your 80% and 78% dates, keep paying on time, and check your Loan Estimate for the real premium. Related: How Much Down Payment Do You Need? · How Does a Mortgage Work?
Sources
- CFPB, What is private mortgage insurance?
- CFPB, When can I remove private mortgage insurance (PMI) from my loan?
- CFPB, Determine your down payment
- CFPB, Figure out how much you want to spend
- HUD, Mortgagee Letter 2023-05 (FHA mortgage insurance premiums)
- U.S. Department of Veterans Affairs, VA-backed purchase loan
- Freddie Mac, Primary Mortgage Market Survey
About the author
Ferran Pujol Acosta is a real estate agent with more than four years of experience who advises beginners on buying and selling property. He writes BuyInMoSmart’s guides using official sources such as the CFPB, Fannie Mae, Freddie Mac, HUD and the IRS. About the author and our editorial policy.