How to Get Private Mortgage Insurance (PMI) in 5 Steps

Private Mortgage Insurance (PMI) is required for conventional loans with down payments below 20%. To get PMI, choose a lender, apply for a mortgage, and pay the premium (0.2%-2% of loan value annually). PMI can be canceled once equity reaches 20%. Compare costs and cancellation policies before committing.

What Is Private Mortgage Insurance (PMI)?

  • Purpose: Protects lenders if you default on a low-down-payment loan (typically <20%).
  • Cost: 0.2%-2% of the loan amount annually, added to monthly payments or paid upfront.
  • Cancellation: Automatic at 22% equity; request removal at 20%.
  • Loans: Required for conventional loans, not FHA/USDA (they have their own insurance).

5 Steps to Get Private Mortgage Insurance

  1. Check if PMI is required:
    • Down payment <20% on a conventional loan? PMI is mandatory.
    • Use a PMI calculator to estimate costs.
  2. Choose a lender:
    • Compare PMI rates (varies by lender, credit score, and loan-to-value ratio).
    • Ask about lender-paid PMI (higher interest rate but no monthly premium).
  3. Apply for a mortgage:
    • Submit financial docs (income, credit score, debt-to-income ratio).
    • Lender arranges PMI with an insurer (you typically can't choose the provider).
  4. Select a PMI payment method:
    • Monthly: Added to mortgage payments.
    • Upfront: Single premium at closing (may be financed).
    • Split: Partial upfront + monthly.
  5. Close and pay PMI:
    • Sign loan docs; PMI takes effect at closing.
    • Track equity to cancel PMI later (automatic at 78% LTV for some loans).

PMI Cost Comparison by Payment Method

Payment Method Upfront Cost Monthly Cost (Example: $300k Loan) Best For Cancellation
Monthly PMI $0 $50-$200 (0.2%-0.7% annually) Lower initial costs; flexible cancellation Automatic at 22% equity
Single Premium (Upfront) $1,500-$6,000 (1%-2% of loan) $0 Long-term savings; refinancing unlikely No monthly cancellation; refundable if refinanced early
Lender-Paid PMI $0 $0 (but higher interest rate) Borrowers who prefer no PMI payments No cancellation; lasts for loan term
Split Premium $750-$3,000 (0.5%-1%) $25-$100 (reduced monthly) Balance between upfront and monthly costs Partial cancellation possible

How to Avoid or Remove PMI

Avoiding PMI Initially

  • 20% down payment: Eliminates PMI requirement.
  • Piggyback loan: Use a second mortgage (e.g., 80-10-10 loan) to cover 20%.
  • Lender exceptions: Some credit unions or portfolio lenders waive PMI with strong credit.

Removing PMI Later

  1. Automatic termination: At 78% LTV (22% equity) for most loans.
  2. Request cancellation: At 80% LTV (20% equity) with no late payments.
  3. Refinance: If home value rises, refinance to drop PMI.
  4. Home improvements: Increase equity via renovations; get a new appraisal.

Frequently Asked Questions

Is PMI tax-deductible?

As of 2023, PMI premiums are not federally tax-deductible unless Congress renews the deduction. Check IRS updates.

Can I choose my PMI provider?

No. Lenders select the PMI company, but you can compare lenders' PMI rates before applying.

How long does PMI last?

Depends on the loan:

  • Fixed-rate loans: Cancels automatically at 78% LTV (or earlier by request).
  • High-risk loans: May require PMI for the full term (e.g., some adjustable-rate mortgages).

Does PMI protect me?

No. PMI protects the lender if you default. For borrower protection, consider mortgage life insurance.

PMI Cost Calculator (Estimate)

To estimate your PMI:

  1. Loan amount: $___
  2. Down payment: __%
  3. Credit score: ___ (higher = lower PMI rate)
  4. Multiply loan amount by 0.002-0.02 (annual rate) and divide by 12 for monthly cost.

Example: $250,000 loan × 0.005 = $1,250/year ($104/month).