Mortgage Insurance (PMI) 2026: How to Avoid, Remove, or Pay Less
Paying $200-$300/month in PMI? You're not alone. PMI (Private Mortgage Insurance) costs homeowners billions annually - but you can avoid it, remove it, or pay less. Here's everything you need to know about PMI in 2026, including proven strategies to eliminate this expensive monthly cost.
⚡ PMI Quick Facts
Average Cost
$200-$300
Per month
30-Year Total
$72,000
If never removed
Remove At
20% Equity
Typically 5-10 years
🎯 Get a Loan Without PMI
Compare lenders offering low-PMI or no-PMI options. See if you qualify for VA, USDA, or piggyback loans:
What Is PMI (Private Mortgage Insurance)?
PMI (Private Mortgage Insurance) is insurance that protects the lender - not you - if you default on your mortgage. It's required when you put down less than 20%.
❌ WHY PMI EXISTS:
When you put down less than 20%, the lender takes on more risk. If you default and they foreclose, they might not recover the full loan amount.
Example:
• You buy $400K home with 5% down ($20K)
• Loan amount: $380K
• You default after 1 year
• Home value drops to $360K
• Lender sells for $360K but is owed $378K
• Loss: $18K
PMI protects lender from this loss. You pay $300/month, but if you default, PMI insurance company pays lender the difference.
How Much Does PMI Cost?
PMI costs 0.3-1.5% of your loan amount annually, paid monthly. The exact rate depends on:
| Credit Score | Down Payment | PMI Rate | Monthly Cost ($400K) |
|---|---|---|---|
| 760+ | 10% | 0.30% | $108/month |
| 740-759 | 10% | 0.40% | $144/month |
| 720-739 | 5% | 0.70% | $266/month |
| 680-719 | 5% | 0.90% | $342/month |
| 620-679 | 3% | 1.50% | $582/month |
Example: $400K Loan, 5% Down, 680 Credit
PMI Calculation:
- • Loan amount: $380,000
- • PMI rate: 0.9% annual
- • Annual PMI: $380,000 × 0.009 = $3,420
- • Monthly PMI: $3,420 ÷ 12 = $285/month
Total Cost Over Time:
- • 5 years: $285 × 60 = $17,100
- • 10 years: $285 × 120 = $34,200
- • 30 years: $285 × 360 = $102,600
5 Ways to Avoid PMI
Here are 5 proven strategies to avoid paying PMI altogether:
Strategy #1: Put Down 20%
✅ BEST OPTION (If You Have the Cash):
Put down 20% or more = No PMI required.
Example: $400K Home
• 20% down = $80,000
• Loan amount = $320,000
• PMI = $0
• Savings = $200-300/month
Pros: No PMI, lower monthly payment, better rates
Cons: Need $80K saved, less cash for emergencies
Strategy #2: VA Loan (Veterans Only)
✅ BEST OPTION FOR VETERANS:
VA loans have NO PMI and allow 0% down!
Benefits:
• 0% down payment
• No PMI (saves $200-300/month)
• Lower rates than conventional
• No loan limits (for full entitlement)
Cost: VA funding fee (1.4-3.6% upfront, can be rolled into loan)
Example: $400K Home
• 0% down = $0
• Funding fee = $5,600 (1.4%)
• Monthly PMI = $0
• 30-year savings vs conventional = $72,000-$108,000!
Strategy #3: USDA Loan (Rural Areas)
✅ GREAT FOR RURAL/SUBURBAN BUYERS:
USDA loans allow 0% down with lower insurance than PMI.
Benefits:
• 0% down payment
• Lower insurance (0.35% vs 0.5-1.5% PMI)
• Covers 97% of US geography
Requirements:
• Home in USDA-eligible area (check USDA map)
• Income under 115% of area median
• 640+ credit score
Example: $400K Home
• 0% down = $0
• Monthly insurance = $117 (vs $285 PMI)
• Savings = $168/month = $60,480 over 30 years
Strategy #4: Piggyback Loan (80-10-10)
✅ SMART FOR 10% DOWN:
Use two mortgages to avoid PMI: First mortgage (80%), Second mortgage (10%), Down payment (10%).
How It Works:
• First mortgage: 80% of home value (no PMI needed)
• Second mortgage: 10% HELOC or second lien
• Your down payment: 10%
Example: $400K Home
• First mortgage: $320,000 at 6.5%
• Second mortgage: $40,000 at 8.5% (HELOC)
• Down payment: $40,000
• Total monthly: $2,018 + $308 = $2,326
• vs PMI option: $2,217 + $285 = $2,502
• Savings: $176/month
Pros: No PMI, tax-deductible interest on both loans
Cons: Two payments, second mortgage has higher rate
Strategy #5: Lender-Paid PMI
💡 ALTERNATIVE OPTION:
Lender pays PMI in exchange for slightly higher interest rate.
How It Works:
• Instead of monthly PMI, you get 0.25-0.5% higher rate
• No separate PMI payment
• Can't remove later (rate is permanent)
Example: $400K Loan
• Option A: 6.5% rate + $285/month PMI = $2,502 total
• Option B: 6.875% rate + $0 PMI = $2,577 total
When It Makes Sense:
• Plan to refinance in 2-5 years
• Want lower monthly payment initially
• Tax benefits (interest is deductible, PMI might not be)
When to Avoid:
• Plan to stay 10+ years (pay more long-term)
• Want to remove PMI at 20% equity
🎯 Find Lenders with Low or No PMI
Compare lenders offering VA, USDA, piggyback loans, or lender-paid PMI options:
Compare Lenders (No-PMI Options)How to Remove PMI
Already paying PMI? Here are 4 ways to remove it:
Method #1: Automatic Removal at 22% Equity
📐 FEDERAL LAW (Homeowners Protection Act):
Lender MUST automatically remove PMI when:
• Loan balance reaches 78% of original home value (22% equity)
• You're current on payments
Timeline:
• $400K home, $380K loan (5% down)
• Need to pay down to $312K (78% of $400K)
• At 6.5% rate: Takes 10-11 years
Note: This is based on ORIGINAL home value, not current value. If home appreciates, you can request removal earlier (see Method #2).
Method #2: Request Removal at 20% Equity
✅ FASTEST METHOD (If Home Appreciated):
Requirements:
• 20% equity (loan balance ≤80% of current home value)
• Current on payments (no late payments in past 12 months)
• Good payment history
• May need new appraisal ($400-600)
Process:
1. Call lender and request PMI removal
2. Lender orders appraisal (you pay $400-600)
3. If appraisal shows 20%+ equity, PMI removed
4. Savings start next month
Example:
• Bought for $400K with 5% down ($380K loan)
• 3 years later, home worth $450K
• Loan balance: $365K
• Equity: $450K - $365K = $85K (19%)
• Need: $90K equity (20% of $450K)
• Pay down $5K extra → Request removal → Save $285/month!
Method #3: Refinance to Remove PMI
💡 BEST IF RATES DROPPED OR CREDIT IMPROVED:
Refinance into new loan with 20%+ equity = No PMI.
When It Makes Sense:
• Rates dropped 0.5%+ since you bought
• Your credit improved 40+ points
• Home appreciated significantly
• You have 20%+ equity
Example:
• Original loan: $380K at 7.0% + $285 PMI = $2,813/month
• Home now worth $450K, balance $365K
• Refinance: $365K at 6.5%, no PMI = $2,308/month
• Savings: $505/month = $6,060/year
• Closing costs: $5,000
• Break-even: 10 months
Bonus: Also get lower rate + remove PMI = double savings!
Method #4: Lump Sum Payment to Reach 20%
💰 IF YOU HAVE EXTRA CASH:
Make lump sum principal payment to reach 20% equity.
Example:
• Home value: $400K
• Current loan: $330K (17.5% equity)
• Need 20% equity = $320K max loan
• Pay down: $10,000
• New balance: $320K (20% equity)
• Request PMI removal
• Save: $285/month = $3,420/year
• ROI: 34.2% annual return on $10K!
This is one of the best investments you can make! Where else can you get 34% guaranteed return?
PMI vs MIP vs VA Funding Fee
Not all mortgage insurance is the same. Here's the comparison:
| Type | Loan | Upfront | Monthly | Duration |
|---|---|---|---|---|
| PMI | Conventional | $0 | 0.3-1.5% | Drops at 20% |
| MIP (FHA) | FHA | 1.75% | 0.55-0.85% | Life (if less than 10% down) |
| USDA Fee | USDA | 1.0% | 0.35% | Life |
| VA Fee | VA | 1.4-3.6% | $0 | N/A |
✅ WINNER: CONVENTIONAL PMI (If You Can Remove It)
• No upfront fee
• Drops at 20% equity (5-10 years typically)
• Lower total cost than FHA MIP
Example: $400K Loan, 30 Years
• Conventional PMI: $285/month × 84 months (7 years) = $23,940
• FHA MIP: $7,000 upfront + $245/month × 360 months = $95,200
• Savings: $71,260!
🎯 Ready to Eliminate PMI?
Compare lenders offering low-PMI or no-PMI options. Save $200-$300/month:
Frequently Asked Questions
Is PMI a waste of money?
Yes and no. PMI protects the lender, not you. But it allows you to buy with less than 20% down. Without PMI, you'd need to save $80K for a $400K home (could take 5-10 years). With PMI, you can buy with $14K-$40K and start building equity now. Strategy: Buy with PMI, remove it at 20% equity (2-7 years).
Can I negotiate PMI rates?
Not directly, but you can shop lenders. PMI rates are set by PMI companies (MGIC, Radian, Genworth), not lenders. However, different lenders work with different PMI companies. Shop 3-5 lenders to compare PMI rates. Difference can be 0.2-0.4% ($60-120/month on $400K loan).
What if my lender refuses to remove PMI?
They must remove at 22% equity by law. If you request removal at 20% equity and they refuse: 1) Verify you meet requirements (20% equity, current on payments, good history), 2) Get independent appraisal ($400-600), 3) Submit formal written request with appraisal, 4) If still refused, file complaint with CFPB (Consumer Financial Protection Bureau).
Does refinancing reset PMI timeline?
Yes, it's a new loan. If you refinance with less than 20% equity, you'll have PMI on the new loan. However, if you refinance WITH 20%+ equity, no PMI on new loan. This is why many people refinance specifically to remove PMI (when they hit 20% equity but lender won't remove PMI on original loan).
Can I pay PMI upfront instead of monthly?
Yes, called single-premium PMI. Pay entire PMI cost upfront at closing instead of monthly. Example: $400K loan, 5% down = $8,000-$12,000 upfront vs $285/month. Pros: Lower monthly payment, may be tax-deductible. Cons: Lose money if you refinance/sell early, can't remove it. Only makes sense if staying 10+ years.
Meet Sarah
Senior Mortgage Advisor & VA Loan Specialist
Sarah Mitchell brings over 12 years of mortgage industry expertise, specializing in VA loans and first-time homebuyer programs. As a certified NMLS professional, she has helped thousands of veterans and military families achieve homeownership through specialized loan programs. Her deep understanding of VA benefits and down payment assistance programs makes her a trusted advisor for service members transitioning to civilian life.
EXPERTISE:
KEY ACHIEVEMENT:
Helped 2,500+ veterans secure home loans