Frequently Asked Questions
How much does PMI cost per month?
PMI typically costs $30-150+ per month per $100,000 borrowed. On a $400,000 loan with 10% down, expect $150-250 monthly. Exact cost depends on credit score, down payment amount, and loan type. Higher credit scores and larger down payments mean lower PMI.
When can I stop paying PMI?
You can request cancellation when you reach 80% LTV (20% equity). Lender must automatically cancel at 78% LTV if you're current on payments. With high appreciation, you may be able to remove PMI sooner by proving new value with appraisal.
Is PMI tax deductible?
PMI was tax deductible through 2021 for itemizers with AGI under $109,000 (married). Congress must extend the deduction each year. Check current tax law. If deductible, it reduces the after-tax cost of PMI, but still costs more than avoiding it with 20% down.
Can I avoid PMI without 20% down?
Options: 80-10-10 piggyback loan (10% down, 10% HELOC), lender-paid PMI (higher rate instead of monthly PMI), some credit unions waive PMI for members, or FHA loans (have MIP instead—usually more expensive). Most buyers simply accept PMI as cost of entry.
Does PMI go towards my principal?
No. PMI is separate insurance premium that doesn't reduce your loan balance. Your regular P&I payment reduces principal. PMI is purely an insurance cost—you get no equity benefit from it. This is why eliminating PMI is financially smart.
What credit score do I need to avoid high PMI?
760+ gets the best PMI rates. 700-759 is good. Below 680, PMI rates jump significantly. At 620, PMI may cost 2-3x more than at 760. If your score is below 680, consider improving credit before buying to save thousands in PMI costs.
Is lender-paid PMI better?
Lender-paid PMI (LPMI) means higher interest rate instead of monthly PMI. Good if you'll keep loan short-term (under 5-7 years). Break-even analysis needed. If staying long-term, monthly PMI is usually cheaper because it can be eliminated, while higher rate stays forever.
Can PMI be removed early?
Yes, if your home value increases significantly. Pay for a new appraisal showing 80% or less LTV based on current value. Requires market appreciation or improvements increasing value. Check with lender—some require 2-year seasoning before allowing reappraisal.
Does PMI apply to FHA loans?
FHA has MIP (Mortgage Insurance Premium), not PMI. MIP includes upfront premium (1.75%) and annual premium (0.15-0.75%). Key difference: MIP often stays for life of loan on FHA (with <10% down), while PMI automatically cancels on conventional loans. FHA MIP is usually more expensive.
What is the 78% rule for PMI?
Federal law requires automatic PMI termination on conventional loans when you reach 78% LTV of the original purchase price, assuming you're current on payments. At 80%, you can request early cancellation. You don't need to wait for automatic termination—take action at 80%.
Should I pay 20% to avoid PMI or keep the cash?
Depends: can you earn more than PMI cost by investing the difference? PMI at 0.5% vs investment return at 7% suggests keeping cash may win. However, cash flow matters too—PMI adds monthly burden. Also, 20% down gets better rates and no PMI hassle. Consider your full financial picture.
Can I deduct PMI payments from my taxes?
The PMI tax deduction expired after 2021 and must be renewed by Congress. As of 2026, check current tax law. If extended, it's an itemized deduction subject to income phase-outs. Even if deductible, you're still paying it—20% down remains the best way to avoid PMI costs entirely.