What is PMI in Mortgage? (2026 Guide)
Learn what Private Mortgage Insurance (PMI) is, how it works, and how to avoid it. Understand the costs and when PMI gets removed.
PMI Cost Estimator
Monthly PMI Cost
$157.50
What is Private Mortgage Insurance (PMI)?
Private Mortgage Insurance (PMI) is a type of insurance policy that protects lenders against losses if a borrower defaults on their mortgage. It is typically required when the down payment is less than 20% of the home's purchase price.
PMI allows borrowers to purchase a home with a smaller down payment, making homeownership more accessible. However, it adds an additional monthly cost to your mortgage payment.
How PMI Works
1. Required When
PMI is required when your down payment is less than 20% of the home price, resulting in a loan-to-value (LTV) ratio greater than 80%.
2. Premium Calculation
PMI premiums are calculated as a percentage of the loan amount, typically between 0.5% and 1.5% annually, paid monthly.
3. Removal
PMI is automatically removed when your LTV reaches 78% based on the original value. You can request removal at 80% LTV.
How to Avoid PMI
Make a 20% Down Payment
The simplest way to avoid PMI is to save for a 20% down payment. This brings your LTV to 80% or below, eliminating the need for PMI.
Use a Piggyback Loan
An 80-10-10 loan combines a first mortgage (80%) with a second mortgage (10%), allowing you to put down only 10% without PMI.
PMI Cost Comparison by Home Price (2026)
As of 2026, here's how PMI costs scale with home price at 10% down with good credit (720+), assuming PMI rate of 0.75% annually:
| Home Price | Down Payment (10%) | Loan Amount | Monthly PMI | Annual PMI | 5-Year PMI Total |
|---|---|---|---|---|---|
| $250,000 | $25,000 | $225,000 | $141.00 | $1,688 | $8,438 |
| $300,000 | $30,000 | $270,000 | $169.00 | $2,025 | $10,125 |
| $400,000 | $40,000 | $360,000 | $225.00 | $2,700 | $13,500 |
| $500,000 | $50,000 | $450,000 | $281.00 | $3,375 | $16,875 |
Key Insight: PMI doesn't just scale with home price—it also depends on your credit score and LTV ratio. A borrower with a 760 credit score might pay 0.5% annually, while a 680 score could pay 1.0% or more for the same loan.
Frequently Asked Questions
What is PMI in mortgage?
PMI (Private Mortgage Insurance) is a type of insurance that protects the lender if you default on your mortgage. It is required when your down payment is less than 20% of the home price.
How much does PMI cost in 2026?
As of 2026, PMI typically costs between 0.5% and 1.5% of the loan amount per year. For a $300,000 loan, that would be $1,500 to $4,500 annually, or $125 to $375 per month.
When does PMI go away?
PMI is automatically removed when your loan-to-value ratio reaches 78% based on the original purchase price. You can also request cancellation when you reach 80% LTV. This typically takes 5-10 years with regular payments.
Can I avoid PMI?
Yes, you can avoid PMI by making a 20% down payment, using a piggyback loan (80-10-10), or considering alternative loan programs. Saving for a larger down payment is the most straightforward approach.
Is PMI tax deductible in 2026?
PMI may be tax deductible if you itemize deductions and your income is below certain limits. For 2026, the deduction is available for incomes up to $109,000 ($54,500 for married filing separately). Consult a tax professional for details.
What credit score do I need for PMI?
Most lenders require a credit score of at least 620 for conventional loans with PMI. Higher credit scores (740+) can qualify for lower PMI rates, potentially saving you hundreds of dollars annually.
What is the difference between PMI and MIP?
PMI is for conventional loans, while MIP (Mortgage Insurance Premium) is for FHA loans. MIP typically lasts the entire loan term unless you put down 10% or more, in which case it can be removed after 11 years.
Can I refinance to remove PMI?
Yes, refinancing is a common way to remove PMI. If your home has appreciated enough to reach 20% equity, you can refinance into a new loan without PMI. However, refinancing costs should be weighed against the savings.
What loan types require PMI?
Conventional loans with less than 20% down require PMI. FHA loans require MIP regardless of down payment. VA loans do not require mortgage insurance. USDA loans have a guarantee fee instead of PMI.
What happens to PMI if I make extra payments?
Making extra payments can help you reach 20% equity faster, allowing you to request PMI cancellation earlier. You should notify your servicer when you believe you've reached 80% LTV.
Is PMI required on investment properties?
Yes, PMI is typically required on investment properties with less than 20% down. The PMI rates for investment properties are usually higher than for primary residences, often 0.5-1% higher.
Can I cancel PMI early?
Yes, you can request PMI cancellation once you have 20% equity in your home. Some lenders allow cancellation at 80% LTV, while others require additional documentation or an appraisal.
Related Tools & Resources
PMI Calculator
Calculate your PMI costs based on LTV and credit score.
How to Avoid PMI with 10% Down
Strategies for avoiding PMI without 20% down.
Is 20% Down Payment Necessary?
Understanding down payment requirements.
PMI Cost Calculator
Calculate monthly PMI costs for different scenarios.
Disclaimer: This article is for educational purposes only and does not constitute financial advice. PMI requirements and costs vary by lender.
Always consult with a qualified mortgage professional to understand PMI requirements for your specific situation.