PMI: What It Is, How to Avoid It, and How to Remove It
The short answer
- Freddie Mac estimates PMI at about $30 to $70 a month per $100,000 borrowed; your Loan Estimate shows your actual cost
- Better credit scores and larger down payments generally mean lower PMI
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Why this matters
If you put less than 20% down on a conventional loan, you will usually pay private mortgage insurance. It protects the lender, not you — but you pay for it. Here is how it works and how to get rid of it.
What PMI Costs
Freddie Mac estimates PMI at roughly $30 to $70 per month for every $100,000 borrowed. For example, on a $280,000 loan that is about $84 to $196 per month. The exact cost depends on your credit score, down payment, and loan details; your Loan Estimate shows the real figure. Better credit and a larger down payment generally mean lower PMI.
How to Avoid PMI
Put 20% down. Some lenders offer "lender-paid PMI," built into a higher interest rate for the life of the loan, so it does not drop off later. VA loans have no monthly mortgage insurance, though most borrowers pay a one-time funding fee. FHA loans have their own mortgage insurance with different rules. Some credit unions offer no-PMI programs; compare their rates and fees.
How to Remove PMI
For conventional loans, you can ask in writing to cancel PMI once your balance is scheduled to reach 80% of the home's original value (the lower of the price or the purchase appraisal), or sooner with extra principal payments, if your payment history is good and you meet the servicer's other conditions, such as no second loan on the home and proof the value has not dropped. PMI must end automatically at 78% of original value, or at the loan's midpoint, if you are current. Separately, some loans allow removal based on current value after a waiting period — Fannie Mae, for example, at 75% after two years or 80% after five, with an appraisal you pay for. Appreciation is not guaranteed.
Everything to remember
- Freddie Mac estimates PMI at about $30 to $70 a month per $100,000 borrowed; your Loan Estimate shows your actual cost
- Better credit scores and larger down payments generally mean lower PMI
- You can ask to cancel PMI when your balance is scheduled to reach 80% of the home's original value — it ends automatically at 78%
- Some loans allow removal based on a new valuation of the home after a waiting period — but appreciation is not guaranteed
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