Private mortgage insurance protects the lender if you default. You pay for it; it covers them. It applies on conventional loans with less than 20% down.
What it costs
Annual premium generally runs 0.30% to 1.10% of the loan, driven by:
- Loan-to-value — higher LTV, higher premium
- Credit score — this is the largest single factor, and the spread is wide
- Loan term — shorter terms price better
- Occupancy and property type
On a $360,000 loan at 90% LTV with good credit, expect roughly $150–190 a month. With weaker credit at the same LTV, it can exceed $300.
The four ways to structure it
- Borrower-paid monthly — the default. Cancellable.
- Single premium — paid upfront as a lump sum. Lower total cost if you hold long, but not refundable if you sell early.
- Lender-paid — folded into a higher rate. Never cancels, because it is not separately identified — you carry the higher rate for the life of the loan.
- Split premium — partial upfront, reduced monthly
Lender-paid MI is frequently mis-sold as “no PMI.” It is PMI, permanently baked into your rate. On a long hold it is usually the most expensive option.
Removing it
Automatic termination — 78% LTV
Under the Homeowners Protection Act, the servicer must cancel PMI automatically when your balance reaches 78% of the original value, based on the original amortization schedule, provided you are current. No request needed, no appraisal.
Requested cancellation — 80% LTV
You may request cancellation at 80% of original value. Requirements typically include a good payment history, no junior liens, and sometimes a current valuation confirming value has not declined.
Appreciation-based removal
The one most people miss. If values rose, you may reach 80% on current value long before the schedule gets you there.
Servicer requirements commonly follow investor guidelines: typically 75% LTV if the loan is two to five years old, 80% if older than five years, with a new appraisal at your expense — usually $500–800.
If PMI is $180 a month, a $600 appraisal that eliminates it pays for itself in under four months. This is one of the highest-return administrative tasks available to a homeowner, and almost nobody does it.
Substantial improvements
Some servicers will consider value added by significant renovation, though rules are stricter.
The FHA difference
FHA mortgage insurance is not PMI and does not follow these rules. On most current FHA loans with less than 10% down, MIP lasts the life of the loan. The only route off is refinancing into a conventional loan once you have 20% equity.
This is why comparing FHA against low-down conventional purely on rate is a mistake — the permanence of the mortgage insurance often outweighs the rate difference over a long hold.
The practical checklist
- Find your original amortization schedule and note the month you hit 80% and 78%
- Check recent comparable sales annually
- If values rose materially, call the servicer and ask their specific appreciation-based removal requirements
- Order the appraisal only after confirming their threshold and process
- Get the removal confirmed in writing
Common questions
At 78% loan-to-value based on the original amortization schedule, provided you are current.
Yes. Many servicers will consider removal based on a new appraisal once you reach 80% or better on current value, subject to seasoning requirements.
General information, not advice on your specific situation. Guidelines, limits and pricing change, and vary by lender, programme and state. Nothing here is a commitment to lend or an offer of credit. For tax or legal questions, consult a qualified professional.
Sree Basireddy · Mortgage Loan Officer, NMLS 2705737 · Loan Factory, Inc., NMLS 320841 · Equal Housing Opportunity