Last Updated on October 21, 2026 by Syed Sarim Naqvi
Private mortgage insurance (PMI) protects the lender, not you, if you default on a conventional loan with less than 20% down. It typically costs about 0.46% to 1.5% of the loan amount a year, you can request cancellation once your balance reaches 80% of the home’s original value, and federal law requires automatic termination at 78% or at the loan’s midpoint if you are current on payments.
Key Takeaways
- PMI is required on many conventional loans with a down payment under 20% and protects the lender, not the homeowner
- Cost is generally 0.46% to 1.5% of the loan a year according to Tomo and the Urban Institute figure cited by Beancount, and 0.5% to 1.5% per TD
- Under the Homeowners Protection Act you can request cancellation at 80% loan-to-value, and the lender must automatically terminate it at 78% or the midpoint of the term
- Lender-paid PMI is built into a higher interest rate and typically cannot be cancelled like borrower-paid PMI
- Refinancing into a loan at 80% of appraised value or less removes the PMI requirement
What Is PMI?
TD Bank explains PMI as a type of insurance that protects the lender, not the homeowner, if the borrower stops making mortgage payments, usually required on conventional loans with a down payment of less than 20%. Century Communities adds that lenders buy cover from private insurers and pass the cost to borrowers. It is not homeowners insurance, a point the Beancount guide stresses, and it differs from FHA mortgage insurance, which follows different removal rules.
Borrower-Paid or Lender-Paid PMI?
| Type | How You Pay | Can You Cancel It? |
|---|---|---|
| Borrower-paid (BPMI) | A monthly premium added to your mortgage payment; the most common type | Yes, at 80% LTV on request and automatically at 78% |
| Lender-paid (LPMI) | Built into a higher interest rate; lower payment now, possibly more over the loan’s life | Typically no, because it is baked into the rate |
The table follows TD Bank, Bankrate’s syndicated explainer and Wikipedia’s mortgage insurance entry, which also notes some lenders give borrowers a credit to cover borrower-paid PMI.
How Much Does PMI Cost?
Tomo says PMI generally ranges from 0.46% to 1.5% of the loan amount per year, and Beancount attributes the same range to the Urban Institute’s Housing Finance Policy Center. TD says the average is 0.5% to 1.5% of the original loan amount per year. Century Communities notes cost varies with down payment, loan amount and credit score. As an illustration only, on a $300,000 loan, 0.46% to 1.5% is about $1,380 to $4,500 a year, or $115 to $375 a month.
- Down payment: a larger down payment generally lowers the rate
- Credit score: stronger credit lowers the cost
- Loan amount: the premium is a percentage of the loan
When Can You Remove PMI?
Bankrate’s syndicated guide explains the Homeowners Protection Act gives conventional borrowers three rights: request cancellation once the loan reaches 80% loan-to-value, automatic termination at 78%, and termination at the loan’s midpoint, whichever comes first, provided you are current. It gives a simple example: $240,000 owed on a $300,000 home is 80% LTV, so you can ask your lender to cancel. Beancount adds that cancellation is never automatic at 80%, so you must ask, and that the law covers most conventional, conforming mortgages on a primary residence closed on or after July 29, 1999, with high-risk loans exempt from the 78% rule.
Can Extra Payments or a Refinance Help?
Beancount notes that extra principal payments bring you to 80% sooner in real life, but automatic termination still happens on the scheduled date, so requesting early cancellation at 80% usually saves more. Century Communities says that if you refinance and the new loan is 80% or less of the home’s appraised value, you will not need PMI on it. Check your servicer’s process, since many ask for an appraisal or payment history.
PMI and FHA Mortgage Insurance
TD Bank and Beancount both flag that FHA loans play by different rules. FHA mortgage insurance is a separate government program, and its removal is not governed by the same 80% and 78% cancellation steps as conventional PMI. Compare the loan type’s rules before choosing a mortgage.
How Does This Connect to the Rest of Specialty Insurance?
PMI is one of several policies that attach to a home purchase. See Title Insurance Explained for ownership protection, Condo Insurance (HO-6) Explained and Mobile and Manufactured Home Insurance Explained for the homeowner side, and Home Warranty vs Homeowners Insurance Explained. For property that sits empty, read Vacant Home Insurance Explained, and for gaps in other loans, Gap Insurance Explained.
FAQ
What is PMI?
Insurance that protects the lender if you default on a conventional loan, typically required with less than 20% down.
Does PMI protect me?
No. It protects only the lender.
How much does PMI cost?
Generally about 0.46% to 1.5% of the loan amount per year, depending on down payment, credit and loan size.
When can I cancel PMI?
You can request cancellation when your balance reaches 80% of the home’s original value.
When does PMI end automatically?
At 78% loan-to-value or the loan’s midpoint, if you are current on payments.
What is lender-paid PMI?
PMI paid by the lender and built into a higher interest rate, which usually cannot be cancelled.
Does refinancing remove PMI?
If the new loan is 80% or less of the appraised value, you will not need PMI on it.
Glossary
- PMI: private mortgage insurance, lender protection on low-down-payment conventional loans.
- Loan-to-Value (LTV): the loan balance as a percentage of the home’s value.
- Homeowners Protection Act (HPA): the 1998 federal law governing PMI cancellation.
- Borrower-Paid PMI (BPMI): PMI billed monthly to the borrower.
- Lender-Paid PMI (LPMI): PMI built into the interest rate.
- Midpoint Termination: automatic PMI end halfway through the loan term.
Sources
- Tomo: What Is Private Mortgage Insurance (PMI)? (cost range, 80% and 78% thresholds)
- TD Bank: What Is Private Mortgage Insurance? (lender protection, average cost, LPMI, FHA difference)
- Century Communities: What Is PMI? (cost drivers, refinance rule)
- Bankrate (syndicated): PMI Got You Into Your Home, It Shouldn’t Overstay Its Welcome (three HPA rights, 80% example)
- Beancount: How to Get Rid of PMI (Urban Institute range, HPA scope, FHA rules)
- Wikipedia: Mortgage Insurance (BPMI and LPMI, HPA overview)
Related reading: Landlord Insurance Explained · Flood Insurance Explained · High-Value Home Insurance Explained
Published October 2026. Rates, thresholds and eligibility vary by lender, loan type and servicer and change often; always confirm your cancellation rights and process with your servicer, and refresh this article periodically.
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