For many homebuyers, PMI is a necessary evil. It allows you to buy a home without saving a massive 20% down payment, but it adds a surcharge to your monthly bill that doesn't build equity.
How Much Does PMI Cost in 2026?
PMI isn't a flat fee. It typically ranges from 0.5% to 1.5% of your loan amount annually, depending on your credit score.
Example:
On a $400,000 loan, 1% PMI costs you $333 per month.
Calculation: $400,000 × 0.01 = $4,000 annually ÷ 12 = $333/month
PMI costs vary based on several factors:
- Credit Score: Higher scores (740+) typically get lower PMI rates (0.5-0.75%)
- Loan-to-Value (LTV): Smaller down payments result in higher PMI costs
- Loan Amount: Larger loans may have slightly different PMI structures
- Loan Type: Conventional loans use PMI, while FHA loans use MIP (Mortgage Insurance Premium)
3 Ways to Avoid Paying PMI
1. The 20% Down Payment
The classic method. If you pay 20% of the home's price upfront, lenders don't require insurance.
Example: On a $400,000 home, you'd need $80,000 down payment to avoid PMI entirely.
2. Piggyback Loans (80-10-10)
You take a first mortgage for 80%, a second "piggyback" loan for 10% (often at a higher rate), and put 10% cash down.
Trade-off: Avoid PMI but pay higher interest on the second loan. Calculate total costs to ensure it's worth it.
3. Lender-Paid PMI (LPMI)
The lender pays the insurance, but charges you a slightly higher interest rate (e.g., 6.75% instead of 6.5%) for the life of the loan.
Warning: Unlike regular PMI, LPMI cannot be removed and you'll pay higher interest for the entire loan term. Run the numbers carefully.
How to Remove PMI
The good news is that on conventional loans, PMI is not permanent.
Automatic Termination
By federal law, lenders must cancel PMI when your loan balance is scheduled to hit 78% of the original home value.
This happens automatically based on your original amortization schedule—no action needed from you, but it may take 8-10 years depending on your loan terms.
Requesting Cancellation
Once you believe you have reached 80% loan-to-value (LTV)—either by paying down debt or because your home value spiked—you can request early cancellation (usually requires an appraisal).
Requirements: You typically need to make on-time payments for 2+ years, prove your LTV is at or below 80%, and pay for a new appraisal ($300-$500). Some lenders may require 75% LTV if home values have declined.
Important Note About FHA Loans
FHA loans use MIP (Mortgage Insurance Premium), not PMI. MIP is typically permanent if you put down less than 10%, and can only be removed after 11 years if you put down 10% or more. If you have an FHA loan, consider refinancing to a conventional loan once you reach 20% equity.
Estimate Your Costs
Not sure if you should put more money down to avoid this fee? You can estimate your PMI costs using our calculator to see how different down payments affect your monthly budget.
Our mortgage calculator helps you:
- Calculate PMI costs based on your loan amount and credit score
- Compare monthly payments with and without PMI
- See how different down payment amounts affect your total monthly payment
- Determine when you'll reach 80% LTV to remove PMI
