PMI costs between 0.5% and 1.5% of your loan amount per year, paid monthly

If you put down less than 20% on a home, your lender requires private mortgage insurance (PMI). The cost divides into 12 monthly payments added to your mortgage bill. On a $300,000 loan, that might be $125 to $375 per month — but the exact amount depends on your down payment size, credit score, loan type, and the lender you choose.

PMI protects the lender, not you. If you stop paying, the insurance covers their loss. Because of this, the cost is not fixed across all borrowers. Two people buying the same house with the same down payment can pay different PMI amounts if one has a higher credit score or a different loan structure.

Key Takeaways

  • PMI is calculated as a percentage of your loan amount and paid monthly as part of your mortgage payment, typically ranging from 0.5% to 1.5% annually.
  • A smaller down payment (5% instead of 15%) raises your PMI rate because the lender's risk is higher.
  • Your credit score affects PMI cost — borrowers with scores above 740 usually pay less than those below 620.
  • You can stop paying PMI once your home equity reaches 20%, either through payments or home value increase.
  • Getting a quote from your lender before closing shows your exact monthly cost, since rates vary between lenders.

How lenders calculate your PMI amount

Lenders use three main factors: the size of your down payment, your credit score, and the type of loan. A loan-to-value ratio (LTV) compares your loan amount to the home's value. If you buy a $400,000 home with $60,000 down, your LTV is 85% — meaning you borrowed 85% of the purchase price. The higher your LTV, the higher your PMI rate.

Credit score matters because it predicts whether you will pay on time. Someone with a 760 score might pay 0.55% annually, while someone with a 640 score might pay 1.25% for the same loan. The difference compounds over years. On a $300,000 loan, that is roughly $150 per month versus $310 per month.

Loan type also shifts the cost. A conventional loan (the most common type) has different PMI rates than an FHA loan, which has its own mortgage insurance structure. An ARM (adjustable-rate mortgage) may have different insurance costs than a fixed-rate loan because the lender's long-term risk profile differs.

What changes your monthly PMI payment

Your lender locks in your PMI rate at closing, so your monthly payment stays the same for as long as you carry the insurance. However, the total amount you pay can change if you refinance your mortgage. Refinancing means taking out a new loan to pay off the old one — if your home value has risen or your credit score has improved, your new PMI rate might be lower.

Some lenders offer lender-paid PMI, where the lender covers the insurance cost but charges you a higher interest rate instead. This spreads the cost across your entire loan term rather than as a separate monthly line item. The total cost to you may be higher or lower depending on how long you keep the loan.

When PMI stops and how to remove it

PMI is not permanent. Once your home equity reaches 20% — meaning you owe 80% or less of the home's current value — you can request removal. This happens through two paths: your monthly mortgage payments building equity, or your home's value rising.

If you put 10% down on a $400,000 home, you owe $360,000. You need $80,000 in equity to hit the 20% threshold. That takes years of payments. But if your home appreciates to $450,000 while you still owe $360,000, you now have $90,000 in equity — 20% — and can request PMI removal when ready.

Contact your lender in writing to request removal. They may require a new appraisal to confirm your home's current value, which costs $300 to $500. Some lenders remove PMI automatically once you hit 22% equity, but do not count on it — many require you to ask.

Getting your actual PMI quote before closing

Your lender must provide a Loan Estimate within three business days of your process. This document shows your estimated PMI payment, along with interest rate, property taxes, homeowners insurance, and other costs. The PMI figure is an estimate, not final, because it depends on the appraisal and final underwriting.

Before you sign the final paperwork (called closing), you receive a Closing Disclosure that shows your actual PMI amount. This is the number that will appear on your first mortgage statement. If it differs significantly from the Loan Estimate, ask your lender why — sometimes the difference reflects a higher or lower appraisal than expected.

Shop around if you are early in the process. Different lenders quote different PMI rates for the same borrower. Getting quotes from three lenders can reveal savings of $50 to $150 per month, which adds up to thousands over the years you carry the insurance.

PMI versus other mortgage insurance types

PMI applies to conventional loans. FHA loans use mortgage insurance premiums (MIP), which work differently. FHA borrowers pay an upfront premium at closing (usually 1.75% of the loan amount) plus an annual premium split into monthly payments. FHA insurance does not go away at 20% equity — it stays for the life of the loan if you put down less than 10%.

VA loans (for military borrowers) and USDA loans (for rural borrowers) have their own insurance structures. VA loans charge a one-time funding fee instead of monthly insurance. USDA loans charge both an upfront may provide fee and annual insurance. If you are considering different loan types, compare the total insurance cost, not just the monthly payment.

Frequently Asked Questions

Can I pay PMI upfront instead of monthly?

Yes. Some lenders allow you to pay the entire PMI cost at closing instead of spreading it across monthly payments. This is called a single premium. The upfront cost is higher, but you avoid monthly payments. This works best if you have cash on hand and plan to keep the loan long-term.

Does PMI ever go down if my credit score improves?

No. Your PMI rate locks at closing and does not change if your credit score rises. However, if you refinance your mortgage, the new lender will quote a new PMI rate based on your current credit score, which may be lower. Refinancing has closing costs, so compare the savings against those costs first.

What if I inherit money and want to pay down my loan faster?

Extra payments reduce your loan balance and build equity faster, which gets you to 20% equity sooner. Make sure your loan has no prepayment penalty (a fee for paying early). Once you reach 20% equity, request PMI removal in writing. Some lenders remove it automatically, but most require you to ask.

Is PMI tax deductible?

PMI was tax deductible for some borrowers in past years, but that deduction expired. Check with a tax professional about your specific situation, as rules change. In most cases, PMI payments are not deductible on your federal tax return.

How much will PMI add to my total home cost?

It depends on how long you carry it. If you pay $200 monthly for 7 years before hitting 20% equity, you pay $16,800 total. If you reach 20% equity in 10 years, it could be $24,000. Getting a quote from your lender shows the exact monthly amount, so you can calculate your own total based on when you expect to reach 20% equity.