Private Mortgage Insurance:
What It Costs & How to Cancel
PMI is the trade-off for putting less than 20% down on a conventional loan. Unlike FHA mortgage insurance, it's temporary, and understanding the mechanics can save you thousands.
The Basics
What Private Mortgage Insurance Actually Is
Private mortgage insurance protects the lender, not you, if you default on your mortgage. It's required on any conventional loan where the down payment is less than 20% of the purchase price. The borrower pays the premium, but the insurance policy pays out to the lender in the event of foreclosure. This arrangement is what makes low-down-payment conventional loans possible in the first place.
PMI is provided by private insurance companies, not the government. Companies like MGIC, Radian, Genworth, Essent, and National MI compete for this business, which means rates vary between providers. Your lender typically selects the PMI company, but the pricing is driven primarily by your credit score and loan-to-value ratio. The better your credit profile, the less PMI costs, and the faster your path to cancelling it altogether.
Pricing
How PMI Is Calculated and What It Typically Costs
PMI rates are expressed as an annual percentage of your original loan amount, paid monthly. The premium depends on three primary factors: your credit score, your LTV ratio, and the coverage level required by the lender. Higher-risk profiles pay more. On a $300,000 loan, annual PMI could range from $600 at the low end to $4,500 at the high end.
| Credit Score | 5% Down (95% LTV) | 10% Down (90% LTV) | 15% Down (85% LTV) |
|---|---|---|---|
| 760+ | 0.30% / $75/mo | 0.20% / $50/mo | 0.19% / $48/mo |
| 720 to 759 | 0.50% / $125/mo | 0.33% / $83/mo | 0.28% / $70/mo |
| 680 to 719 | 0.80% / $200/mo | 0.53% / $133/mo | 0.41% / $103/mo |
| 640 to 679 | 1.15% / $288/mo | 0.78% / $195/mo | 0.62% / $155/mo |
| 620 to 639 | 1.50% / $375/mo | 1.05% / $263/mo | 0.85% / $213/mo |
Representative monthly costs based on a $300,000 loan. Actual rates vary by PMI provider and lender. See how credit tiers affect all conventional costs
PMI payment options
Monthly premiums are most common, but PMI can also be paid as a single upfront premium at closing, a split premium (part upfront, part monthly), or absorbed into a higher interest rate through lender-paid PMI. Each structure has trade-offs depending on how long you plan to keep the loan. Mortgages by Channing shows you all available options during your rate quote.
Cancellation
How to Cancel PMI, The 20% and 22% Rules
This is conventional's single largest advantage over FHA mortgage insurance. PMI is temporary. Once you've built enough equity in your home, you can eliminate the monthly premium entirely. There are two pathways to cancellation, and understanding both gives you control over when you stop paying.
Borrower-Requested Cancellation (80% LTV)
- Request removal at 20% equityOnce your principal balance reaches 80% of the original appraised value, you can formally request PMI cancellation from your servicer.
- Requirements for approvalCurrent on payments, good payment history (no 30-day lates in past 12 months, no 60-day lates in past 24 months), and no subordinate liens.
- New appraisal may be requiredIf you're relying on home value appreciation (not just principal paydown), the servicer may require a new appraisal at your expense to confirm the current value supports 80% LTV.
Automatic Termination (78% LTV)
- Servicer must cancel automaticallyWhen your scheduled payments bring the balance to 78% of the original value, the servicer is legally required to terminate PMI, you don't need to request it.
- Based on amortization scheduleThis date is based on the original payment schedule, not actual payments made. Extra payments can accelerate reaching 78% but the automatic date is fixed at closing.
- Must be current on paymentsIf you're delinquent when the 78% date arrives, automatic termination is delayed until you're current.
The midpoint backstop
Regardless of your LTV, PMI must be terminated at the midpoint of your loan term. On a 30-year mortgage, that's year 15. On a 15-year mortgage, that's year 7.5. This protects borrowers in markets where home values decline and the 78% threshold isn't reached through normal amortization.
Want To Know What This Looks Like On Your Numbers?
Every scenario is different. A soft credit check tells you where you actually stand, and nothing hits your report until you decide to move forward.
Alternative
Lender-Paid PMI: No Monthly Premium, Higher Rate
Lender-paid PMI (LPMI) eliminates the separate monthly insurance payment by baking the cost into a slightly higher interest rate. The lender pays the PMI premium upfront or absorbs it into their margin, and in exchange, your rate is typically 0.125% to 0.375% higher than it would be with borrower-paid PMI.
When LPMI Makes Sense
- You plan to hold the loan 7+ yearsSince LPMI can't be cancelled (it's built into the rate), it works best when you expect to keep the mortgage long enough that the slightly higher rate still beats years of PMI payments.
- You want a lower monthly payment nowLPMI reduces the visible monthly payment by eliminating the separate PMI line item, even though the rate is higher.
- DTI is tightRemoving the PMI payment from your qualifying ratios can help you qualify for a larger loan amount. The higher rate affects DTI less than a separate insurance premium does.
When LPMI Doesn't Work
- You'll reach 20% equity quicklyIf you plan to make extra payments or expect rapid appreciation, borrower-paid PMI lets you cancel it. LPMI rate stays forever (unless you refinance).
- You plan to sell within 3 to 5 yearsThe cumulative cost of the higher rate may exceed what you'd have paid in PMI during that short window.
- Your credit score qualifies for cheap PMIAt 760+, borrower-paid PMI is inexpensive, making the LPMI rate increase a worse deal comparatively. See down payment strategies
Comparison
Conventional PMI vs. FHA Mortgage Insurance (MIP)
This comparison is critical for every borrower deciding between conventional and FHA. Both require mortgage insurance when putting less than 20% down, but the structures are fundamentally different, and those differences can add up to tens of thousands of dollars over the life of a loan.
| Feature | Conventional PMI | FHA MIP |
|---|---|---|
| Upfront premium | None (unless single-pay) | 1.75% of loan amount |
| Annual premium range | 0.20% to 1.50% (credit-based) | 0.55% (flat rate, most loans) |
| Cancellation | Yes, at 20%/22% equity | No, life of loan (most terms) |
| Credit score impact | Directly affects premium | No effect on MIP rate |
| Provider | Private companies (MGIC, etc.) | FHA / HUD |
| LPMI option | Available | Not available |
The long-term math matters
At a 740 credit score with 5% down, conventional PMI runs around 0.50% annually and cancels at 20% equity. FHA MIP is 0.55% annually plus a 1.75% upfront fee, and it never cancels. Over 10 years, the conventional borrower saves significantly because the PMI disappears while FHA MIP continues. Below 680, the calculation flips because conventional PMI rates climb above FHA's flat 0.55%. See the full conventional vs FHA breakdown
Strategy
The 80/10/10 Piggyback: Avoiding PMI Entirely
A piggyback loan structure uses two mortgages simultaneously to avoid PMI altogether. The first mortgage covers 80% of the purchase price (no PMI required), a second mortgage (typically a home equity loan or HELOC) covers 10%, and the remaining 10% comes from your down payment. This is called an 80/10/10 structure.
Variations include 80/15/5 (5% down with a 15% second mortgage) and 80/20/0 (no down payment, though this is rare in current markets). The key advantage is eliminating PMI entirely, which can save hundreds per month. The trade-off is a higher interest rate on the second mortgage and more complex closing logistics.
When Piggyback Works Well
- Strong credit (740+) with 10% cashThe first mortgage gets best pricing at 80% LTV, and you avoid PMI entirely. Total cost is often lower than a single 90% LTV mortgage with PMI.
- Higher loan amountsOn expensive purchases, PMI on a large balance can be substantial. Piggyback structures cap the insured amount.
Potential Downsides
- Higher second mortgage rateHELOCs and second mortgages carry rates 1 to 3% higher than first mortgages, increasing total interest cost.
- More complex qualificationYou're qualifying for two loans simultaneously. Both lenders assess your income and DTI. See full qualification requirements
Want To Know What This Looks Like On Your Numbers?
Every scenario is different. A soft credit check tells you where you actually stand, and nothing hits your report until you decide to move forward.
See Your Actual PMI Cost
Mortgages by Channing quotes your real PMI premium based on your credit score and down payment, plus shows you LPMI and piggyback alternatives side by side.
Common Questions
PMI FAQ
Answers about private mortgage insurance costs, cancellation, and alternatives.
Get Your PMI Quote
Mortgages by Channing shows you the exact monthly PMI cost, LPMI alternative, and the date your PMI will auto-cancel, all before you commit.
The Application
Apply From Your Phone In Fifteen Minutes
The whole application runs on your phone. Snap photos of your documents, connect your bank, and you're done. It reaches me the minute you submit it.
- Starts with a soft credit check, so your score is never touched
- We run conventional next to FHA so you see both payments
- Upload documents with your phone camera, no scanner needed
- You hear back from Channing, not from a call center queue
If the numbers say wait, I'll tell you that too, and then we make a plan to fix whatever is in the way.
Complete Your Application
Five short steps. Most people finish in about fifteen minutes.
- Tell us what you're looking for
- We check your conventional numbers
- Upload your documents
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Got your application. I'm reviewing it now and will call you this afternoon.
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Find Out Where You
Actually Stand
A soft credit check tells you what you qualify for before anyone pulls hard credit. If the numbers say wait, I will tell you that too, and then we make a plan to fix whatever is in the way.
See What I Qualify ForMortgages by Channing · 337-476-2623 · Licensed across Louisiana · NMLS #1457759
