What is private mortgage insurance (PMI)?

Last updated: May 08, 2026

Private mortgage insurance (PMI) is a type of insurance designed to protect lenders from potential losses that could come if a borrower defaults on a loan. Even though the coverage protects lenders, homeowners are the ones who pay for the coverage..

Understanding PMI and how it impacts your full financial picture is important. Let's explore answers to some common questions about private mortgage insurance so you can see how it fits into your homebuying journey.

Lenders generally require private mortgage insurance on a conventional loan when the down payment is less than 20%. The premium may be added to your monthly mortgage payment, but some borrows pay the entire amount upfront at closing.

PMI provides coverage to the lender if the borrower stops making mortgage payments, and the loan goes into default, helping reimburse the lender for a portion of the remaining loan balance. If you fall behind on your mortgage payments, you may still face late fees, credit score impacts and, in serious cases, foreclosure.

According to Freddie Mac, homeowners pay between $30 and $70 per month for every $100,000 they borrowed. How much you'll pay each month depends on several factors, including the loan amount and down payment. PMI may also cost less if you put more money down and have a good credit score.

The amount you're paying for PMI will be listed on your loan estimates, quotes, disclosures, and mortgage statements throughout your homebuying journey.

Typically, PMI is automatically removed by your lender when your loan is first scheduled to reach a loan-to-value ratio (LTV) of 78%. You may be able to remove it sooner once you pay your loan down to 80% LTV. LTV is your loan balance divided by your home’s purchase price or value at the time your loan is closed, whichever is lower.

Additionally, if your home value increases after you get your loan, you may be able to request PMI cancellation at an earlier time. This will usually require a new appraisal of your home, which may incur extra costs on your part.

Options and requirements for PMI cancellation will vary depending on your specific loan. Your lender can break down the information that applies to your loan.

Homeowners rarely receive refunds for paid-in-full PMI premiums. However, if you've prepaid your PMI and the coverage is cancelled or removed early, you may see a refund for any unearned premiums, or the portion of the premium that covered time after the policy ended.

People often confuse MIP and PMI. MIP stands for "mortgage insurance premiums," a type of insurance required on all Federal Housing Administration (FHA) loans. Homebuyers with FHA loans typically pay a one-time mortgage insurance premium and then ongoing annual premiums, no matter what their down payment is. However, a higher down payment — often 10% or more — usually means your MIP ends after 11 years.

PMI, however, is normally required on conventional loans when the down payment is less than 20%. Moreover, you can typically have PMI removed. 

Deciding if private mortgage insurance is a good idea depends on your situation and financial goals. Putting 20% down often gets you a lower interest rate, so borrowing doesn't cost at much overall. On the other hand, someone with limited savings might choose to pay PMI so they can buy a home sooner and start building equity.

Now that you know a bit about PMI, talk to your home mortgage consultant if you have any questions during your homebuying journey.