If you buy a home in the US with less than 20% down on a conventional loan, your lender will almost always require private mortgage insurance (PMI). It can add over a hundred dollars to your monthly payment — but it doesn't last forever, and there are several ways to avoid or shorten it.
What PMI is (and who it protects)
PMI is insurance that protects the lender, not you, if you stop making payments. Because a small down payment means the lender has less of a cushion, it asks you to pay for this protection. In return, PMI makes it possible to buy a home years earlier than if you had to save a full 20%.
How much does PMI cost?
PMI is usually quoted as an annual percentage of the loan amount — commonly somewhere between about 0.3% and 1.5% — and is added to your monthly payment. The exact rate depends mainly on your credit score and how much you put down.
Here is what PMI could look like on a $350,000 home with a 6.5% 30-year loan, assuming a 0.5% PMI rate and that PMI ends automatically when the balance reaches 78% of the purchase price:
| Down payment | Loan | PMI / month | How long | Total PMI |
|---|---|---|---|---|
| 5% ($17,500) | $332,500 | $139 | ≈ 11 years 3 months | ≈ $18,700 |
| 10% ($35,000) | $315,000 | $131 | ≈ 9 years 1 month | ≈ $14,300 |
| 15% ($52,500) | $297,500 | $124 | ≈ 6 years 3 months | ≈ $9,300 |
| 20% ($70,000) | $280,000 | $0 | — | $0 |
Each extra 5% down lowers the monthly charge a little, but its biggest effect is on how long you pay it.
When PMI goes away
For conventional loans, the US Homeowners Protection Act sets two key points (based on the home's original value):
- 80% loan-to-value — you can ask to cancel. Once your balance reaches 80% of the original value, you can request cancellation in writing, provided your payment history is good. In the 10%-down example above, that happens after about 95 payments (just under 8 years).
- 78% loan-to-value — it ends automatically.The lender must drop PMI when the balance is scheduled to reach 78%, if you're current on payments — about 109 payments in the same example.
FHA loans work differently: they charge a mortgage insurance premium (MIP) that, for many borrowers, lasts for the life of the loan unless you refinance. VA loans don't charge monthly mortgage insurance but usually have an upfront funding fee.
Five ways to avoid or shorten PMI
- Put 20% down. The simplest route, if saving a little longer is realistic. Plan it with our savings goal calculator.
- Pay extra principal. Extra payments reach the 80% mark sooner. In the 10%-down example, adding $200 a month gets there in about 62 payments instead of 95 — then request cancellation.
- Ask for a new appraisal. If your home's value has risen, some lenders will cancel PMI based on the new value (rules and seasoning periods vary).
- Improve your credit score before applying — a higher score usually means a lower PMI rate.
- Compare lender-paid PMI or other programs, but check the trade-off: lender-paid PMI usually means a higher interest rate for the whole loan.
Is paying PMI ever worth it?
Often, yes. If waiting to save 20% would take years while home prices and rents keep rising, paying PMI for a limited period can cost less than waiting. The key is to treat it as temporary: know your 80% date, and plan to reach it. To compare scenarios, read how much house you can afford, then run the numbers below — the mortgage calculator shows your monthly PMI, how many months you'll pay it and the total cost.