How Much Does PMI Cost?
PMI premiums depend on your credit score, down payment, and loan amount. For a $300,000 loan, PMI might cost $50 to $150 per month. Borrowers with higher credit scores and larger down payments pay lower PMI rates. Some lenders offer single-premium PMI paid upfront at closing, which can save money if you plan to keep the loan long-term.
How Do You Cancel PMI?
Under the Homeowners Protection Act, you can request PMI cancellation once your loan balance falls to 80% of the home's original purchase price. Lenders must automatically cancel PMI when your balance reaches 78%. A new appraisal showing significant appreciation may also allow earlier cancellation if the loan-to-value ratio drops below 80% based on current value.
Are There Ways to Avoid PMI?
The simplest way is to make a 20% down payment. Alternatively, some lenders offer lender-paid PMI, where they cover the insurance in exchange for a higher interest rate. A piggyback loan — an 80/10/10 structure with a second mortgage — is another strategy. VA loans have no PMI requirement, and USDA loans charge a different guarantee fee instead.
Frequently asked questions
Is PMI the same as homeowners insurance?
No. Homeowners insurance covers damage to your home and liability. PMI covers the lender's risk if you default. Both may be required, but they serve completely different purposes and are separate policies.
Can I deduct PMI on my taxes?
Congress has periodically allowed a PMI deduction, but it has not always been in effect. Check current tax law or consult a tax professional to see if a PMI deduction applies to your situation this year.