Understanding Private Mortgage Insurance
Private Mortgage Insurance (PMI) is required by lenders when your down payment is less than 20% of the home price. It protects the lender (not you) in case you default on the loan. PMI typically costs 0.3% to 1.5% of the original loan amount per year, paid as part of your monthly mortgage payment.
How PMI Is Removed
Under the Homeowners Protection Act, you can request PMI cancellation when your equity reaches 20% of the original home value. Your lender must automatically terminate PMI when equity reaches 22%. You may also be able to remove PMI early if your home has appreciated significantly, though this typically requires a new appraisal.
Frequently Asked Questions
What determines my PMI rate?▾
Your PMI rate depends on your credit score, down payment percentage, loan type, and loan-to-value ratio. Borrowers with higher credit scores (760+) and larger down payments (15-19%) get the lowest PMI rates. A credit score below 680 with only 5% down could result in PMI rates over 1%.
Is PMI tax deductible?▾
The PMI tax deduction has been available on and off. As of 2024, the deduction has expired for most taxpayers, though it may be renewed by Congress. Consult a tax professional for the current status and whether you qualify based on your income level.
Can I avoid PMI with less than 20% down?▾
Yes, there are alternatives. Lender-paid mortgage insurance (LPMI) rolls the cost into a higher interest rate. A piggyback loan (80/10/10) uses a second mortgage to cover part of the down payment. VA loans have no PMI at all. Each option has trade-offs, so compare total costs carefully.
Is FHA mortgage insurance the same as PMI?▾
No. FHA loans have their own mortgage insurance premiums (MIP) that work differently. FHA MIP includes an upfront premium (1.75%) and annual premiums (0.55%), and for loans with less than 10% down, MIP lasts the life of the loan. Conventional PMI can be removed at 20% equity, making it potentially less expensive long-term.
Calclypso Editorial Team
Reviewed by certified financial professionals. Last updated: April 2026. PMI removal rules based on the Homeowners Protection Act of 1998.