0.2-2% of loan per year
Private mortgage insurance (PMI): cost and cancellation
Private Mortgage Insurance (PMI) is required on conventional mortgages when the down payment is under 20%. PMI typically costs 0.5-1.5% of the loan annually, paid monthly. PMI protects the lender, not the borrower. By federal law, lenders must automatically cancel PMI when LTV reaches 78% based on the original purchase price, or you can request cancellation at 80% LTV.
Level
Try calculatorKey takeaways
04 · ideas- PMI typically costs 0.2-2% of the loan amount annually
- Borrowers can request cancellation at 80% LTV
- Lenders must automatically cancel PMI at 78% LTV under the Homeowners Protection Act
- FHA MIP has different rules and may not automatically cancel
Private Mortgage Insurance (PMI) is insurance required on most conventional loans when the down payment is less than 20% of the home price. PMI protects the lender — not the borrower — in the event of default.
Cost: Typically 0.2-2% of the loan amount per year, depending on credit score and LTV. On a $300,000 loan, PMI at 0.8% costs $2,400/year ($200/month).
How it is paid:- Added to the monthly mortgage payment (most common)
- Single upfront premium at closing
- Lender-paid PMI (LPMI): lender pays the insurance in exchange for a higher interest rate