Guide · United States
What Is PMI? Private Mortgage Insurance Explained for US Buyers
Last updated 2026-06-27 · Published 2026-06-27
Understand Private Mortgage Insurance (PMI) on US home loans. Learn how much it costs, how it's calculated, and how to eliminate it when you reach 20% equity.
What Is Private Mortgage Insurance (PMI)?
Private Mortgage Insurance (PMI) is a policy that US conventional lenders require if you put down less than 20% of the home's purchase price.
It is important to understand that PMI does not protect you, the buyer. Instead, it protects the lender if you default on your loan payments and the home goes into foreclosure.
How Much Does PMI Cost?
The cost of PMI varies depending on your credit score, your down payment percentage, and your loan type. Typically, it ranges from 0.2% to 1.5% of your original loan amount annually.
This annual cost is divided by 12 and added to your monthly mortgage payment. For example, on a $300,000 loan with a 1% annual PMI rate, you would pay an extra $250 per month.
How to Cancel and Remove PMI
Under the Homeowners Protection Act, conventional lenders must automatically terminate PMI once your loan balance reaches 78% of the original purchase price of the home.
Alternatively, you can request that your lender cancel PMI once you reach 80% equity. This can be achieved through regular payments, making extra principal payments, or because your home's value has appreciated (which may require a new appraisal).
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Go to calculator →Frequently asked questions
Does PMI build equity in my home?
No. PMI is a premium paid to an insurance company. It does not go toward your principal balance or build equity in your home. It is a pure cost of borrowing with a low down payment.
How can I avoid paying PMI entirely?
The most direct way is to make a down payment of 20% or more. Alternatively, you can explore piggyback loans (such as an 80-10-10 loan) or lender-paid mortgage insurance (LPMI), which trades a higher interest rate for no monthly PMI.
Educational content only—not mortgage, tax, or legal advice. Confirm any decision with a licensed professional in your jurisdiction.