Private Mortgage Insurance (PMI) protects the lender — not you — if you default on your mortgage. It's required on conventional loans when your down payment is less than 20%.
How Much Does PMI Cost?
Typically 0.5%–1.5% of the loan amount per year, added to your monthly payment. On a $300,000 loan: $125–$375/month.
How to Remove PMI
- Reach 20% equity and request cancellation
- Automatically removed at 22% equity (federal law)
- Refinance once you have 20% equity
PMI vs. MIP (FHA Loans)
PMI applies to conventional loans and cancels automatically once you reach 78% loan-to-value. FHA loans instead charge MIP (Mortgage Insurance Premium), which — for loans with less than 10% down — lasts for the life of the loan and can only be removed by refinancing into a conventional mortgage.
Lender-Paid PMI
Some lenders offer "lender-paid PMI," which folds the insurance cost into a slightly higher interest rate instead of a separate monthly fee. It can lower your monthly payment, but unlike borrower-paid PMI, it can't be canceled later — you'd need to refinance to remove it.