What Is Private Mortgage Insurance? PMI Cost and How It Ends
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Private mortgage insurance, or PMI, is a premium you pay on a conventional loan when your down payment is under 20%. It protects the lender if you default, not you. PMI runs roughly 0.5% to 1.5% of the loan amount per year, priced by your credit score, and it cancels automatically once you owe 78% of the home’s original value.
We represent NYC buyers, and PMI comes up less here than nationally, because a co-op board already made you put 20% down. It’s mostly a condo-buyer question in the city.
You pay it, the bank keeps it, and if you default it still doesn’t help you. That’s worth understanding before you sign.
How much does PMI cost, and what moves it
Your credit score sets the price of insuring against your credit score. A 760-plus score lands near 0.46% of the original loan a year. A score in the low 600s runs closer to 1.5%.
| Loan amount | Score ~760 | Score ~620-640 |
|---|---|---|
| $300,000 | ~$115 a month | ~$375 a month |
| $500,000 | ~$190 a month | ~$625 a month |
| $700,000 | ~$270 a month | ~$875 a month |
Down payment matters too: 15% down costs less PMI than 5% down, since the lender’s risk is smaller. Our guide to what a conventional loan is covers where PMI fits in the total payment.
How to get rid of PMI
PMI is the one bill that leaves on its own if you make it to the halfway mark. There are three ways off it, from fastest to slowest:
- Request cancellation at 80% loan-to-value. Once you owe 80% of the home’s original value, ask your lender in writing. You need a clean payment history and no second lien.
- Automatic termination at 78%. The lender must drop PMI when your balance hits 78% of the original value, no request needed. The Homeowners Protection Act guarantees that right, per the CFPB’s own summary.
- The loan midpoint. Regardless of value, PMI ends at the midpoint of the amortization schedule, 15 years into a 30-year loan.
A rising market speeds this up. If your home’s value has climbed, order a new appraisal. Ask the lender to cancel PMI on the current value, not the purchase price. Our mortgages and financing hub covers a refinance as the other route out.
PMI vs MIP on an FHA loan
They do the same job and behave very differently. PMI can be shown the door, FHA’s version moves in.
FHA loans carry a mortgage insurance premium, or MIP: 1.75% of the loan upfront, plus an annual premium of 0.15% to 0.75%. If you put down less than 10% on an FHA loan, that annual premium lasts the entire loan term. The only way off it is to refinance into a conventional loan.
USDA loans work similarly, with a 1% upfront fee and a 0.35% annual fee. A VA loan skips monthly insurance entirely and charges a one-time funding fee of 1.25% to 3.3% instead.
How to avoid PMI
Three ways: 20% down, a piggyback loan, or a rate that quietly buries it.
- Put 20% down. The clean answer, and the one a NYC co-op usually forces anyway.
- An 80/10/10 piggyback. A first mortgage at 80%, a second at 10%, and 10% cash. No PMI, but the second loan carries a higher rate.
- Lender-paid PMI. The lender covers the premium in exchange for a higher interest rate on the whole loan. It can pencil out short-term, but it’s permanent, since there’s no premium to cancel.
Our down payment and credit hub covers the assistance programs that can help you reach 20%.
Why NYC buyers see less of it
Most co-op boards require a minimum of 20% down, and many want 25% or more, so a co-op buyer rarely triggers PMI at all. It shows up on condo and townhouse purchases, where a lender will finance 90% and the building can’t stop it.
There’s a small silver lining for condo buyers. NYC’s fast price growth means the 20%-equity mark often arrives through appreciation, not just payments, so PMI can end sooner than the amortization schedule suggests.
What we tell condo buyers about PMI
It’s rent you pay to your own equity until it catches up. On the right deal, paying PMI for a few years to buy now rather than saving another two years for 20% is the correct call, especially in a rising market.
We run that math with a client: the PMI cost against the rent saved and the appreciation captured. As Georges puts it, “it’s all about the numbers,” and the number here is whether waiting to skip PMI costs more than paying it. On an average purchase our commission rebate returns roughly $22,000 at closing, which a buyer can apply to the down payment to cut or skip PMI. Price both versions on the closing cost calculators first.
Common questions
What is private mortgage insurance? A premium on a conventional loan when you put down less than 20%. It reimburses the lender if you default and provides no protection to you.
How much does PMI cost? Roughly 0.5% to 1.5% of the loan amount per year, set mainly by your credit score and down payment. On a $500,000 loan that’s about $190 to $625 a month.
How do I get rid of PMI? Request cancellation at 80% loan-to-value, or wait for automatic termination at 78%. It also ends at the loan’s midpoint regardless of value. A new appraisal in a rising market can speed it up.
Is FHA mortgage insurance the same as PMI? No. FHA MIP is often permanent for the life of the loan if you put down less than 10%, while conventional PMI is temporary and cancels once you reach 20% equity.
Do NYC buyers pay PMI? Usually only condo and townhouse buyers. Co-op boards typically require 20% or more down, which avoids PMI from the start.
Nicole Fishman Benoliel co-founded NestApple in 2017. She's a lawyer admitted to the New York bar - her law degree is from La Escuela Libre de Derecho in Costa Rica, with further study at IE Business School in Madrid and an LLM from Fordham in New York. She does not act in a legal capacity at NestApple; every client is referred to an attorney who handles real estate deals full time.
