Private Mortgage Insurance (PMI) is required on conventional loans when you put down less than 20%. It protects the lender — not you — if you default. PMI typically costs $30-$70 per month per $100,000 borrowed, depending on your credit score and down payment percentage.
| Down Payment | 760+ FICO | 700-759 | 680-699 | 660-679 |
|---|---|---|---|---|
| 5% down | 0.50% | 0.66% | 0.87% | 1.07% |
| 10% down | 0.30% | 0.42% | 0.58% | 0.75% |
| 15% down | 0.19% | 0.26% | 0.37% | 0.48% |
Annual premium as % of loan amount. Divide by 12 for monthly cost. Rates are approximate and vary by insurer.
Example: $300,000 Loan with 5% Down (760+ FICO)
PMI rate: 0.50% annually. Annual PMI: $300,000 × 0.0050 = $1,500. Monthly PMI: $125/month. That's $125/month providing zero benefit to you — pure insurance for the lender. Over 8 years until you reach 80% LTV: $12,000 in PMI payments.
By law, PMI must automatically terminate when your LTV reaches 78% of the original home value. No action needed. This happens on the date you're scheduled to reach 78% based on the original amortization schedule — even if your home has appreciated more.
You can request PMI cancellation when your LTV hits 80%. You'll need: good payment history, no junior liens, possibly an appraisal. If your home has appreciated, you may reach 80% LTV years earlier than the automatic termination date — saving thousands.
If home values have risen significantly, refinancing into a new loan at or below 80% LTV eliminates PMI entirely. You might also get a lower rate. Compare the refinance closing costs against your remaining PMI payments to see if it's worth it.
| Feature | PMI (Conventional) | MIP (FHA) |
|---|---|---|
| Cancellable? | Yes — at 80% LTV | No — life of loan (if <10% down) |
| Cost (3.5-5% down) | 0.50-1.07% annually | 0.55% annually (MIP) + 1.75% upfront (UFMIP) |
| Upfront Fee | None | 1.75% of loan ($5,250 on $300k) |
| Best For | Borrowers who can reach 80% LTV within 5-7 years | Borrowers with lower credit who need the flexibility |
Bottom Line: The cancelability of PMI is its single greatest advantage over FHA MIP. If you can qualify for a conventional loan, even with PMI, it's typically cheaper long-term than FHA because you can eventually stop paying.