If you are buying a home with less than 20 percent down, a lender will almost certainly tell you that you need private mortgage insurance. The line item usually shows up as a monthly charge of a few hundred dollars, and it raises three questions at once: how much does private mortgage insurance cost, how long do you have to pay it, and can you get rid of it?
This guide answers all three with real math. You will see what private mortgage insurance is and who it protects, what it costs at different down payments, how long you pay it under federal rules, the fastest ways to cancel it, how it compares with FHA mortgage insurance and what is deductible in 2026. You will also find worked examples built on a $400,000 home so you can plug in your own numbers.
This article is general education, not mortgage, tax or legal advice. Rates and rules vary by lender and loan type, so confirm figures with your lender and the official sources linked below.
Table of Contents
What Is Private Mortgage Insurance?
Private mortgage insurance, often shortened to PMI, is an insurance policy that protects the lender, not you, if you stop making payments on a conventional mortgage. Lenders see a loan with a small down payment as riskier, because the borrower has little of their own money at stake. PMI shifts part of that risk to an insurance company, which makes lenders willing to approve loans that would otherwise be declined.
Who it protects
This is the point most people miss: you pay the premium, but the policy pays the lender if you default. It does not protect you if you lose your job, and it does not pay your mortgage if you become ill. It does not build equity or provide any benefit to you other than making the loan possible. If you want protection for your family, that is a different product, such as life or disability insurance. Our guide to disability insurance covers one such option.
Who has to pay it
Private mortgage insurance is typically required on conventional loans when the down payment is below 20 percent of the home’s value, which means a loan-to-value ratio above 80 percent. FHA loans use a different system called mortgage insurance premium, and VA and USDA loans have their own fees. We compare those in a later section.
Why 20 percent is the magic number
Lenders and the government-sponsored companies that buy conventional loans treat an 80 percent loan-to-value ratio as the line between lower and higher risk. Below 80 percent, the cushion of your down payment is big enough that the lender can usually recover its money in a foreclosure, even if prices fall somewhat. That is why private mortgage insurance applies to loans above that line and why the rules for canceling it also center on 80 percent.
Types of Private Mortgage Insurance
There are several ways to pay for private mortgage insurance. The right one depends on how long you expect to stay in the home and how much cash you have at closing.
Borrower-paid monthly PMI
This is the most common type. You pay a monthly premium added to your mortgage payment. It can be canceled when you reach enough equity, which is why it is usually the best option for people who expect to build equity or to refinance.
Single-premium PMI
You pay the entire premium upfront at closing, either in cash or by rolling it into the loan. You avoid a monthly charge, but the money is gone if you sell or refinance early, and most single-premium policies are not refundable.
Lender-paid PMI
The lender pays the premium in exchange for a higher interest rate. Your monthly payment may be lower than with borrower-paid insurance at first, but you cannot cancel it. The higher rate stays for the life of the loan unless you refinance.
Split-premium PMI
A smaller upfront payment combined with a lower monthly premium. It is less common, but it can reduce the monthly cost while limiting the upfront payment.
How to choose
If you plan to stay for many years and may reach 20 percent equity quickly, borrower-paid monthly PMI is usually the most flexible. If you will likely sell or refinance in a few years, single premium is a poor fit. Always ask your lender for a side-by-side comparison of total cost under each option over five and ten years.
How Much Does Private Mortgage Insurance Cost?
Private mortgage insurance is priced as a percentage of your loan amount per year, then divided into monthly payments. A commonly cited range is roughly 0.3 percent to 1.5 percent of the loan a year, although your rate can fall outside that range. Your quote is set by risk, so the same house can carry very different premiums for different buyers.
What drives your rate
Down payment, or loan-to-value ratio. The smaller your down payment, the higher the premium, because the lender has less cushion. Credit score. Borrowers with scores above about 760 get the lowest rates, and the price climbs as scores fall. Loan type and term. A 15-year loan is usually cheaper to insure than a 30-year loan. Debt-to-income ratio and occupancy. A primary residence is cheaper to insure than an investment property, and a heavy debt load can raise the price. Coverage level and insurer. Different insurers price differently, though lenders usually choose the insurer for you.
Example: a $400,000 home at three down payments
The table below uses illustrative annual rates for a borrower with good credit. Your actual rate will differ, but the pattern is realistic: more down payment means a smaller loan and a lower rate.
| Down payment | Loan amount | Illustrative annual rate | Monthly private mortgage insurance |
|---|---|---|---|
| 5% ($20,000) | $380,000 | 1.00% | about $317 |
| 10% ($40,000) | $360,000 | 0.60% | about $180 |
| 15% ($60,000) | $340,000 | 0.35% | about $99 |
| 20% ($80,000) | $320,000 | none | $0 |
Going from 5 percent down to 10 percent down cuts the monthly cost by about $137 in this example, because both the loan and the rate shrink. That is $1,644 a year you stop paying for insurance that does not help you.
The cost over time
Private mortgage insurance feels small each month, but the total adds up. Suppose a $380,000 loan carries a 0.5 percent premium, which is about $158 a month. Over the roughly ten years it takes to reach 80 percent of the original value by regular payments alone, you would pay close to $19,600. At a 1 percent rate, the figure is close to $39,300. Those totals are real money, which is why the rest of this guide focuses on canceling it as early as you safely can.
Is it ever worth paying?
Yes, in some cases. If paying private mortgage insurance lets you buy a home years earlier than saving 20 percent would, and the home appreciates or you avoid years of rent increases, the cost can be worth it. The key is to treat the premium as a known cost and plan the exit, not as a charge you forget about. Our guide to renting vs buying a home can help you weigh the decision, and our guide to how much house you can afford shows how the monthly premium affects your budget.
Private Mortgage Insurance vs FHA Mortgage Insurance
FHA loans, which are backed by the Federal Housing Administration and popular with first-time buyers, have their own insurance. It is called the mortgage insurance premium, or MIP, and it works differently from private mortgage insurance in two ways that matter.
Upfront and annual premiums
An FHA loan charges an upfront premium, currently 1.75 percent of the base loan amount, which is usually added to the loan, plus an annual premium paid monthly. On a $400,000 home with 3.5 percent down, the base loan is $386,000, so the upfront premium is about $6,755. A typical annual premium for a 30-year FHA loan with a small down payment is around 0.55 percent, which works out to about $177 a month on that loan. Check current rates on the HUD website or with your lender, because they change.
How long it lasts
This is the big difference. On an FHA loan with less than 10 percent down, the annual premium generally lasts for the life of the loan. With 10 percent or more down, it lasts 11 years. Private mortgage insurance on a conventional loan can be canceled by law when you build enough equity, which can make a conventional loan cheaper over time for borrowers with good credit.
Which is cheaper?
For buyers with lower credit scores, FHA insurance can cost less per month than private mortgage insurance, because conventional insurers price low scores steeply. For buyers with strong credit, conventional private mortgage insurance is often cheaper and can be removed. Compare both with your own numbers. Our guide to low down payment mortgage options walks through FHA, conventional, VA and USDA loans side by side.
VA and USDA loans
VA loans for eligible veterans and service members do not require monthly mortgage insurance, but they charge a one-time funding fee that can be financed. USDA loans for eligible rural areas charge an upfront guarantee fee and a small annual fee. Both are worth considering if you qualify.
How Long Do You Pay Private Mortgage Insurance?
The answer is set by a federal law, the Homeowners Protection Act, which applies to most conventional home loans originated after July 1999. It gives you two main routes to end private mortgage insurance, plus a safety net.
Route 1: Ask to cancel at 80 percent
You have the right to request cancellation in writing once your loan balance reaches 80 percent of the home’s original value, which is usually the purchase price or the appraised value at the time of the loan, whichever is lower. Lenders can require that you have a good payment history, that you have no second mortgage or lien on the home and that the property has not fallen in value. They may require an appraisal to prove it.
Route 2: Automatic termination at 78 percent
If you do not ask, the lender must cancel private mortgage insurance automatically when your balance is scheduled to reach 78 percent of the original value, as long as your payments are current. This is based on the original amortization schedule, not on your actual balance or on current market value.
The safety net: the midpoint rule
Private mortgage insurance must end the month after the midpoint of your loan term, for example after year 15 of a 30-year loan, if you are current on payments, even if you have not reached 78 percent. This rarely matters for most borrowers, but it caps the time you can be charged.
How long it takes on a real loan
Here is the math on a $400,000 home with 5 percent down, a $380,000 loan, a 6.5 percent rate and a 30-year term. The monthly principal and interest payment is about $2,402. Eighty percent of the original value is $320,000, and 78 percent is $312,000.
| Extra principal each month | Time to reach 80% of original value | Insurance paid at 0.5% rate | Insurance paid at 1% rate |
|---|---|---|---|
| $0 | 124 months (about 10.3 years) | about $19,600 | about $39,300 |
| $100 | 102 months (about 8.5 years) | about $16,200 | about $32,300 |
| $200 | 87 months (about 7.2 years) | about $13,800 | about $27,600 |
| $500 | 61 months (about 5.1 years) | about $9,700 | about $19,300 |
Without extra payments, you reach 80 percent after roughly ten years, and automatic termination at 78 percent comes after about 135 months, or around 11 years. An extra $200 a month saves about three years of premiums, which is $5,800 at a 0.5 percent rate and $11,700 at a 1 percent rate, on top of the interest you save by paying the loan down faster. The savings figures assume the premium stays level, which is typical for monthly policies, and that you cancel as soon as you reach 80 percent.
Reaching 80 percent faster with home value
You do not have to wait for your balance to fall if the value of your home has risen. Many lenders let you request cancellation based on a new appraisal if enough time has passed, often two to five years depending on the loan, and if the value supports a loan-to-value ratio at or below 80 percent. In a market where prices have risen, this can be the fastest route. An appraisal usually costs a few hundred dollars, so it is worth the cost when the premium is high.
How to Remove Private Mortgage Insurance Step by Step
- Check your loan type and date. Confirm it is a conventional loan with borrower-paid private mortgage insurance. Lender-paid insurance and FHA premiums follow different rules.
- Find your balance and original value. Your latest statement shows the balance, and your closing documents list the original value.
- Calculate your loan-to-value ratio. Divide your balance by the original value. At 80 percent or lower, you can request cancellation. With a higher home value, use the current value if your lender allows an appraisal.
- Confirm the lender’s requirements. Ask what the servicer requires for a request: payment history, no second liens, appraisal rules and any waiting period.
- Send a written request. Include your loan number and a clear request to cancel private mortgage insurance. Keep a copy and note the date.
- Order an appraisal if needed. Use the lender’s approved process, which may require an appraiser it selects.
- Verify the change. Check your next statements to confirm the premium has dropped out, and ask for written confirmation.
Refinancing to remove it
If your home has gained value or your credit has improved, refinancing into a new loan with 80 percent or less loan-to-value ends the insurance. Closing costs and the new interest rate matter, so compare total cost against simply canceling. Our guide on whether to refinance a mortgage shows how to run the numbers, and our explainer on cash-out refinancing covers a related option.
When removal is not allowed
You may be denied if you have missed payments, if there is a second mortgage, if the property has declined in value or if you are asking before the required waiting period. In that case, ask what you can fix, and reapply when you meet the conditions.
How Your Credit Score Changes What You Pay for Private Mortgage Insurance
Your credit score is one of the largest levers on your premium. Insurers group borrowers into score bands, and each step down raises the rate. The exact numbers change by insurer and market, but the direction is consistent.
Why a few points can matter
Moving from a score in the 660 range to one in the 740 range can cut the annual rate substantially on the same loan, sometimes by half or more. On a $380,000 loan, that can mean $100 or more a month. If you are a few months from applying, raising your score before you lock your rate can pay off for years. Our guides to improving your credit score fast and credit utilization show the quickest wins, such as paying down card balances before your lender pulls your credit.
Check your report first
Errors on a credit report can lower your score without you knowing. Review your reports before you apply and dispute anything wrong. Our guide to disputing a credit report error explains how.
What Private Mortgage Insurance Does to Your Monthly Housing Budget
Private mortgage insurance is only one piece of a monthly housing payment, but it is the piece you can often shrink or remove. The table below shows the full picture for the same $400,000 home at four down payments, using a 6.5 percent rate on a 30-year loan, the illustrative private mortgage insurance premiums from earlier, and placeholder amounts of $367 a month for property taxes and $150 for homeowners insurance. Your taxes and insurance will differ, but the comparison shows how the pieces fit together.
| Down payment | Principal and interest | Private mortgage insurance | Taxes and insurance | Total monthly payment |
|---|---|---|---|---|
| 5% ($20,000) | $2,402 | $317 | $517 | about $3,236 |
| 10% ($40,000) | $2,275 | $180 | $517 | about $2,972 |
| 15% ($60,000) | $2,149 | $99 | $517 | about $2,765 |
| 20% ($80,000) | $2,023 | $0 | $517 | about $2,540 |
What the table shows
Moving from 5 percent to 20 percent down lowers the monthly payment by about $696, and private mortgage insurance accounts for $317 of that, a little under half. The rest comes from the smaller loan. That is why private mortgage insurance deserves attention in your budget: it is a large, avoidable slice of the payment for a borrower with a small down payment.
How to use it
Write your own version of this table before you apply. Use a lender’s estimate for private mortgage insurance, your local tax rate and a quote for homeowners insurance. Then ask whether you can afford the payment at 5 percent down if rates or taxes rise, and what happens to your budget when the premium falls away.
How to Avoid Private Mortgage Insurance
If the premium bothers you, there are several ways to avoid it or reduce it. Each has trade-offs.
Put down 20 percent
The simplest route is also the hardest for many buyers. With 20 percent down, there is no private mortgage insurance on a conventional loan. If you are close, a few more months of saving can eliminate the premium. Our guide to saving for a down payment has a step-by-step approach.
Use a piggyback loan
In a piggyback or 80-10-10 structure, you take a first mortgage for 80 percent of the price, a second loan for 10 percent and put down 10 percent. Because the first loan is at 80 percent, you avoid private mortgage insurance, though the second loan usually has a higher rate. It can work when the second loan is cheaper than the premium would have been, but compare the total cost carefully and remember that a second loan can complicate things if you later need to cancel other insurance.
Consider lender-paid insurance carefully
Lender-paid insurance removes the separate premium by building the cost into a higher rate. It can lower your monthly payment, but the higher rate usually stays for the life of the loan. It tends to make sense mainly if you expect to sell or refinance within a few years.
Look at VA, USDA and special programs
If you qualify for a VA or USDA loan, you may avoid conventional mortgage insurance entirely. Some state and local programs offer down payment assistance that helps you reach 20 percent or reduce the loan amount. Our first-time home buyer guide lists where to look.
Ask about special low-down-payment products
Some lenders and community programs offer low-down-payment conventional loans with reduced insurance requirements or reduced rates. Eligibility often depends on income or location. Ask each lender what is available, because the terms vary and are not always advertised.
Buy Now With Private Mortgage Insurance or Wait to Save 20 Percent?
This is the trade-off many first-time buyers face, and the answer depends on prices, rent and your savings rate rather than on a rule of thumb.
A simple framework
Estimate three things: the total private mortgage insurance you would pay, what you would pay in rent while you wait and how much home prices might rise. If you buy now with 5 percent down on a $400,000 home, insurance might cost around $19,600 to $39,300 over ten years in the earlier example, or less if you cancel sooner. If saving the extra $60,000 for 20 percent would take you three more years while prices climb a few percent a year, you could lose more in higher prices and rent than you save in premiums.
When waiting makes sense
Waiting is reasonable if you lack an emergency fund, your income is uncertain, you would be stretching your budget to afford the monthly payment or the premium would push you into a payment you cannot sustain. A home you can barely afford is a risk no matter what the insurance costs.
When buying now can make sense
Buying now can make sense if you have stable income, an emergency fund, a payment you can comfortably afford, a plan to cancel the insurance when you reach 80 percent and a reason to buy now. Our guide to mortgage pre-approval shows how to learn your numbers before you commit.
Is Private Mortgage Insurance Tax Deductible in 2026?
Possibly. The deduction for mortgage insurance premiums expired after 2021, but a 2025 tax law restored it starting with the 2026 tax year. It applies only if you itemize deductions on Schedule A, and it applies to insurance on debt used to buy, build or improve your main home or a second home.
Income limits
The deduction phases out at higher incomes. It begins to shrink when your modified adjusted gross income exceeds $100,000, or $50,000 if married filing separately, and it disappears entirely at $109,000, or $54,500 if married filing separately. That means it helps moderate-income itemizers but does not help higher earners.
Do you itemize?
Most taxpayers take the standard deduction, which means they get no benefit from this rule. You benefit only if your total itemized deductions, including mortgage interest, state and local taxes and charitable gifts, exceed the standard deduction. Our guide to standard deduction vs itemized helps you decide. See the IRS instructions or IRS Publication 936 for details, and talk to a tax professional about your situation.
A Worked Example: Priya’s Plan to Cancel Private Mortgage Insurance
Priya buys a $400,000 home with 5 percent down. Her loan is $380,000 at 6.5 percent for 30 years, and her private mortgage insurance premium is $190 a month, which is a 0.6 percent annual rate. Her principal and interest payment is about $2,402, so her total payment before taxes and homeowners insurance is about $2,592.
Priya sets a goal: cancel the insurance as early as she safely can. She makes three moves. First, she adds $200 a month in extra principal, which shortens her path to 80 percent from about 124 months to about 87 months. Second, she tracks her home’s value, and after three years she asks the lender about a new appraisal. Third, she keeps a record of her payment history and avoids any second loan.
At the 87-month mark, she would have paid about $16,500 in premiums rather than the roughly $23,500 she would have paid at the scheduled 124 months, a savings near $7,000. If her home appreciates and an appraisal after three years shows her loan-to-value at 80 percent or below, she could cancel even sooner and save more. The point is not the exact figure. It is that a small, steady plan changes the cost of private mortgage insurance by thousands of dollars.
8 Private Mortgage Insurance Mistakes to Avoid
- Not asking about cancellation. Automatic termination happens at 78 percent, but you can ask at 80 percent. Not asking can cost you months of premiums.
- Ignoring the lender-paid trade-off. A lower monthly payment can hide a higher rate for the life of the loan.
- Forgetting to track your balance. The lender will not remind you when you can ask.
- Paying a premium on lender-paid or FHA insurance and expecting to cancel it. Different rules apply, and cancellation may not be possible.
- Taking a second loan before canceling. A second lien can disqualify you from a cancellation request.
- Skipping a rate comparison. Different lenders and insurers quote different premiums for the same borrower.
- Not checking your credit before applying. A better score can cut your premium substantially.
- Missing the deduction. If you itemize and fall under the income limit, you may be able to deduct premiums for 2026.
Frequently Asked Questions About Private Mortgage Insurance
What is private mortgage insurance?
It is insurance that protects the lender if you default on a conventional loan with less than 20 percent down. You pay the premium, but the lender is the beneficiary.
How much does private mortgage insurance cost per month?
It depends on your loan, down payment and credit. A commonly cited range is roughly 0.3 to 1.5 percent of the loan per year. On a $380,000 loan, that is about $95 to $475 a month, and many borrowers pay somewhere in the middle.
How long do you pay private mortgage insurance?
Until you ask to cancel at 80 percent of the original value, until it ends automatically at 78 percent, or at the midpoint of your loan term at the latest. With regular payments on a 30-year loan, that is often around 10 to 11 years, sooner if you pay extra or your home gains value.
Can I cancel private mortgage insurance early?
Yes. You can ask once you reach 80 percent loan-to-value based on the original value, or sooner if a new appraisal shows enough equity and your lender allows it. You can also refinance.
Is private mortgage insurance the same as homeowners insurance?
No. Homeowners insurance protects your home and belongings. Private mortgage insurance protects the lender. You usually need both.
Does private mortgage insurance protect me if I lose my job?
No. It pays the lender, not you. If you want protection for income loss, look at other products such as disability insurance.
Is private mortgage insurance required on FHA loans?
FHA loans use a separate mortgage insurance premium, not private insurance. It has an upfront and annual component and may last for the life of the loan depending on your down payment.
Can I avoid private mortgage insurance with less than 20 percent down?
Sometimes. Options include a VA or USDA loan, a piggyback loan, lender-paid insurance or special low-down-payment programs. Each has trade-offs.
Is private mortgage insurance tax deductible?
For 2026, it may be if you itemize and your income is under the phase-out limits. The deduction expired after 2021 and was restored by a 2025 law. Confirm with a tax professional.
Will private mortgage insurance go down if my credit score improves?
Not automatically. On a typical monthly policy, the rate is set at closing and stays level. If your credit improves a lot, the way to benefit is to cancel the policy when you reach 80 percent equity, or to refinance into a loan that no longer needs it.
Do I pay private mortgage insurance on a second home or an investment property?
Lenders can require it on any conventional loan with less than 20 percent down, but premiums are often higher for second homes and investment properties, and some lenders require a larger down payment for them.
The Bottom Line on Private Mortgage Insurance
Private mortgage insurance is a cost of buying with less than 20 percent down. It protects the lender, it usually runs from about 0.3 to 1.5 percent of the loan per year and it is not permanent. By federal law, you can ask to cancel at 80 percent of the original value, and it ends automatically at 78 percent.
The best approach is to treat it as a temporary cost with an exit plan. Compare quotes, improve your credit before you apply, consider options like a larger down payment or a VA or USDA loan, add extra principal if you can and ask your lender about cancellation as soon as you qualify. Start by working out your own loan-to-value ratio, and put a reminder in your calendar for the month you expect to reach 80 percent. This article is general education, not mortgage, tax or legal advice.
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