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Private Mortgage Insurance (PMI) is required on conventional loans when your down payment is less than 20%. It protects the lender — not you — in case you default on the loan. PMI adds to your monthly payment and can cost hundreds of dollars per month, but there are strategies to minimize or avoid it.

How Much Does PMI Cost?

PMI typically costs 0.3% to 1.5% of the original loan amount per year, depending on your credit score, LTV ratio, and loan amount. On a $350,000 loan at 0.5% annual PMI, that is $1,750/year or about $146/month. Borrowers with higher credit scores pay less — a 780 FICO might pay 0.3% while a 660 FICO could pay 1.2% or more.

How to Remove PMI

PMI is automatically removed when your loan balance reaches 78% of the original property value through scheduled payments. You can request PMI removal at 80% LTV by contacting your servicer — they may require an appraisal to confirm the value. If your home has appreciated significantly, you can request early removal based on current value (typically requires reaching 75% LTV based on a new appraisal).

Strategies to Avoid PMI

Put 20% down — the most straightforward approach. Use a piggyback loan (80/10/10) — take a first mortgage at 80% LTV plus a second mortgage (HELOC) at 10%, with 10% down. This avoids PMI entirely, though the HELOC rate is usually higher. Choose lender-paid PMI — the lender covers PMI in exchange for a slightly higher rate (makes sense if you plan to keep the loan long-term and do not want to deal with PMI cancellation). Consider VA loans if eligible — no PMI ever required.