PMI Insurance Explained: What It Costs and How to Remove It
Published by Cash Flow Deals · Last updated 2026-08-04 · Published and reviewed for compliance by Camilo Palacio, a Florida Licensed Realtor
PMI protects your lender if you default, not you. Conventional loans with less than 20% down require it, and it typically costs 0.46% to 1.5% of your loan amount per year. Federal law forces your lender to cancel it automatically once your balance hits 78% of the home's original value, no request needed. You can also ask for removal earlier once you reach 80%.
| Factor | 20%+ Down Payment | Less Than 20% Down |
|---|---|---|
| PMI required | No | Usually yes, on a conventional loan |
| Monthly cost | $0 | Roughly $30 to $70 per $100,000 borrowed, depending on credit score |
| When it ends | Never applies | Automatically at 78% loan-to-value, or sooner if you request removal at 80% |
What PMI Actually Protects (Hint: It's Not You)
PMI stands for private mortgage insurance. Lenders require it on conventional loans when the down payment is less than 20%, because a smaller down payment means more risk that the lender loses money if the borrower defaults. The policy pays the lender, not the homeowner, if the loan goes into foreclosure. It doesn't protect your credit, your equity, or your ability to stay in the house. It exists purely to make the lender comfortable approving a lower down payment.
What PMI Actually Costs
PMI on a conventional loan typically runs 0.46% to 1.5% of the original loan amount per year, and the exact rate depends heavily on credit score. A borrower with a 760 or higher credit score might pay close to the low end, while someone in the 620 to 639 range could pay near the top. In monthly dollar terms, that generally works out to roughly $30 to $70 for every $100,000 borrowed, added directly to the monthly mortgage payment.
How to Get Rid of It
The Homeowners Protection Act requires lenders to automatically cancel PMI once your loan balance reaches 78% of the home's original value, based on the original amortization schedule, with no action required from you. You can also request removal earlier, once you hit 80% loan-to-value, though the lender may require a good payment history and confirmation there's no second lien on the property first. Paying extra toward principal is the most direct way to get there faster.
PMI vs FHA's MIP: Not the Same Thing
FHA loans don't use PMI. They use MIP, mortgage insurance premium, and the cancellation rules are much less forgiving. If you put down less than 10% on an FHA loan, MIP stays for the life of the loan, full stop. Put down 10% or more, and it can be removed after 11 years. For most FHA borrowers who financed with less than 10% down, the only practical way out is refinancing into a conventional loan once enough equity has built up.
Buying With Financing? PMI Rules Still Apply
If you're buying a home connected through Cash Flow Deals' network, you're financing with your own FHA or conventional lender, the same as any other purchase. That means standard PMI or MIP rules apply exactly the way they would with any lender, based on your down payment and loan type, not on who connected you to the home.
Common questions
What is PMI insurance?
Private mortgage insurance. It's a policy required on most conventional loans with less than 20% down, and it protects the lender, not the borrower, if the loan defaults.
How much does PMI cost per month?
Generally 0.46% to 1.5% of the loan amount per year, which works out to roughly $30 to $70 per month for every $100,000 borrowed, depending mostly on credit score.
When does PMI automatically cancel?
By federal law, once your loan balance reaches 78% of the home's original value on the original amortization schedule. You can request removal earlier, at 80%, if your payment history qualifies.
Is PMI the same as FHA mortgage insurance?
No. FHA loans use MIP instead, which has stricter cancellation rules. Under 10% down means MIP for the life of the loan, and 10% or more down means it can come off after 11 years.
Can I avoid PMI altogether?
Yes, by putting down 20% or more on a conventional loan. Some lenders also offer piggyback second loans or lender-paid PMI structures that avoid a separate monthly PMI line, though those come with their own tradeoffs.
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