PMI Explained: How to Avoid Paying It in 2026
If you buy with less than 20% down on a conventional loan, you'll likely pay Private Mortgage Insurance (PMI). On a $300,000 loan, that's roughly $125 to $375 per month — money that protects your lender, not you. The good news: PMI is temporary, and there are proven ways to avoid it up front or remove it later. Understanding how it works can save you thousands over the life of your loan.
What PMI Actually Is
PMI is insurance your lender requires when your loan-to-value (LTV) ratio is above 80% — meaning you owe more than 80% of the home's value. It reimburses the lender if you default. It does not protect you and does not build equity. Per Freddie Mac, expect to pay roughly $30–$70 monthly for every $100,000 borrowed, depending on your credit score and down payment.
The lower your down payment and credit score, the higher your PMI rate — so a buyer with a 620 score putting 3% down pays far more than one with a 760 score putting 15% down.
Estimated Monthly PMI by Loan Size
| Loan amount | Low (~0.5%) | Typical (~1%) | High (~1.5%) |
|---|---|---|---|
| $150,000 | ~$63 | ~$125 | ~$188 |
| $250,000 | ~$104 | ~$208 | ~$313 |
| $300,000 | ~$125 | ~$250 | ~$375 |
| $400,000 | ~$167 | ~$333 | ~$500 |
How to Avoid PMI Entirely
- Put down 20% or more — no PMI from day one.
- Piggyback loan (80-10-10) — a second loan covers 10%, keeping your first mortgage at 80% LTV.
- Lender-paid PMI (LPMI) — baked into a higher interest rate; run the numbers first, since it can cost more long-term.
- VA loan (if eligible) — 0% down and no PMI, though a one-time funding fee applies.
The Hidden Cost Over Time
Consider a $300,000 loan with typical PMI of $250/month. If it takes you five years to reach 20% equity, that's $15,000 paid toward insurance that builds you zero equity. Removing PMI even one year earlier — through extra principal payments or an appraisal — puts $3,000 back in your pocket. This is why PMI removal is worth actively managing, not just waiting on.
How to Remove PMI You Already Pay
Under the federal Homeowners Protection Act, for conventional loans on a primary residence:
- Request cancellation at 80% LTV — in writing, once you reach 20% equity.
- Automatic termination at 78% LTV — your servicer must cancel it, provided payments are current.
- Pay down principal faster — extra payments reach the 80% threshold sooner.
- Order a new appraisal — if your home appreciated, you may hit 80% on current value.
- Refinance — if you now have 20%+ equity (weigh the closing costs first).
Note: FHA and VA loans follow different rules — FHA insurance (MIP) often lasts 11 years or the life of the loan depending on your down payment, and usually requires a refinance into a conventional loan to eliminate.
See PMI's Impact on Your Payment
The fastest way to understand PMI's effect is to model it:
- Estimate your premium with the PMI Calculator.
- Toggle PMI on and off in the Mortgage Calculator.
- Check if dropping PMI via refinancing makes sense with the Refinance Calculator.
Frequently Asked Questions
What is PMI and who does it protect?
Private mortgage insurance (PMI) is required on conventional loans when your loan-to-value ratio exceeds 80%. It protects the lender if you default — not you — and does not build equity.
How much does PMI cost per month?
PMI typically runs about 0.5% to 1.5% of the loan amount per year, or roughly $30–$70 monthly per $100,000 borrowed. On a $300,000 loan that's about $125–$375 per month.
How can I avoid PMI without putting 20% down?
Options include a piggyback 80-10-10 loan, lender-paid PMI baked into a higher rate, or a VA loan if you're an eligible veteran (0% down, no PMI).
When can I cancel PMI?
Under the Homeowners Protection Act, you can request cancellation once you reach 20% equity (80% LTV), and your servicer must automatically terminate it at 78% LTV if payments are current.
Does FHA mortgage insurance work the same as PMI?
No. FHA loans carry MIP (mortgage insurance premium), which often lasts 11 years or the life of the loan depending on your down payment, and typically requires a refinance to remove.