How PMI Works and How to Avoid It
PMI explained: when private mortgage insurance is required, typical rates, how it is calculated, and how to remove or avoid it.
Last updated: 2026-07-25
Private mortgage insurance, or PMI, is a premium lenders require when your down payment is under 20% of the home price. It protects the lender if you default — not you — but it lets you buy sooner without a full 20% down.
How PMI is calculated
PMI is usually quoted as an annual percentage of the loan balance, typically 0.3% to 1.5%, then billed monthly. On a $300,000 loan at 0.6%, that is $1,800 a year, or about $150 a month. The exact rate depends on your credit score and your loan-to-value ratio — a lower down payment and a lower credit score both push it higher.
How to remove PMI
- Reach 80% LTV — you can request cancellation once the balance falls to 80% of the original value.
- Automatic termination — lenders must drop it automatically at 78% LTV on schedule.
- Reappraise or refinance — if the home has appreciated, a new appraisal or refinance can end PMI early.
Ways to avoid PMI entirely
Putting 20% down is the cleanest way to skip PMI. Alternatives include a piggyback structure (an 80/10/10 first and second loan), lender-paid PMI baked into a slightly higher rate, or certain loan programs that price insurance differently. Each trades one cost for another, so it is worth comparing the monthly numbers before deciding.
Estimate your PMI and see when it drops off using the calculators below.