PMI Explained: The Cost of a Low Down Payment
What private mortgage insurance is, what it costs, and how to get rid of it.
What PMI is
Private mortgage insurance protects the lender when your down payment is under 20% on a conventional loan. It typically costs around 0.5% of the loan per year — roughly $200/month on a $500,000 loan — added to your payment.
How it goes away
On conventional loans, you can request PMI removal once you reach 20% equity, and it terminates automatically at 22% under federal law. Appreciation and extra principal payments can get you there faster.
PMI vs FHA MIP
FHA’s equivalent (MIP) usually lasts the life of the loan unless you refinance or put 10% down. That’s a key reason conventional often wins long-term for buyers who can reach 20% equity reasonably soon.
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Educational information only — not legal, tax, or lending advice. Figures are typical ranges, not quotes or approvals. Confirm specifics with a licensed lender or attorney.
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