Quick Answer
Private mortgage insurance (PMI) is an insurance premium that protects your lender — not you — if you default. On conventional loans it's typically required when you put less than 20% down, and it can usually be removed once you've built enough equity. Waiting years to save 20% is often more expensive than paying PMI and buying sooner.
- Who it protects
- The lender, not the borrower
- When required
- Conventional loans under 20% down
- Removable?
- Yes, once you reach sufficient equity
- FHA equivalent
- MIP — harder to remove
- VA loans
- No mortgage insurance at all
PMI is widely resented and widely misunderstood. It's worth being clear-eyed about it: it's a real cost that buys you nothing directly — and it's also the thing that lets most buyers purchase years earlier than they otherwise could.
Why You're Paying It
Lenders view smaller down payments as higher risk. PMI offsets that risk for them. That's the whole logic. It does not protect you, your family, or your home — if you default, PMI pays the lender, and you still lose the house.
How Much It Costs
PMI is usually a modest percentage of the loan amount annually, split across your monthly payments. Your rate depends mostly on your credit score and how much you put down: better credit and a larger down payment both reduce it. Your lender can quote your exact figure, and it belongs in your affordability math alongside taxes and insurance — try our mortgage calculator.
How to Remove It
On conventional loans, PMI generally comes off once you've built sufficient equity. You can request cancellation when your balance reaches roughly 80% of the original value, and it typically terminates automatically at around 78%. Rising home values can also get you there faster, though removing it early on appreciation usually requires an appraisal.
Importantly, FHA loans work differently. Their mortgage insurance premium (MIP) often lasts the life of the loan depending on your down payment, which means many FHA buyers eventually refinance into a conventional loan specifically to shed it. If you're weighing FHA against conventional, factor that in.
Is It Worth Paying?
Often, yes. The common instinct is to wait and save 20%. But in a market where prices generally rise, spending several more years renting while trying to save can cost more than the PMI would have — you're paying someone else's mortgage and buying at a higher price later.
Run both scenarios honestly rather than treating 20% as a rule. And look at Indiana down payment assistance first; some buyers can reduce or restructure this entirely. VA loans require no mortgage insurance at all for those eligible.
Questions About Your Situation?
We'll walk you through it in plain English — no pressure, no obligation.
Frequently Asked Questions — Private mortgage insurance (PMI)
Do I have to put 20% down to avoid PMI?
On a conventional loan, 20% is the usual threshold to avoid PMI. But VA loans require no mortgage insurance at all for eligible buyers, and some lender programs structure around it. Waiting years to save 20% often costs more than paying PMI and buying sooner, so it is worth running both scenarios.
How do I get rid of PMI?
On conventional loans you can generally request cancellation once your balance reaches about 80% of the original value, and it typically terminates automatically near 78%. Appreciation can get you there sooner, though early removal usually requires an appraisal. FHA mortgage insurance is different and often lasts the life of the loan.
Does PMI protect me if I can't make my payments?
No. This is the most common misunderstanding about PMI. It protects the lender if you default. If you stop paying, PMI pays your lender and you still lose the home. It is not homeowner's insurance and not mortgage life insurance.