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Reviewed by Vatche Saatdjian, Conventional Loan Expert, 30+ Years
Private Mortgage Insurance (PMI) on conventional loans: understand the cost, when it's required, and five proven ways to eliminate it and save hundreds per month.
See exactly how much PMI adds to your payment
Step-by-step methods to eliminate PMI
Key differences and which is better
Everything you need to know about Private Mortgage Insurance for conventional loans.
What it is: PMI protects the lender if you default on a conventional loan with less than 20% down. You pay it monthly, but it's for the lender's benefit, not yours.
When required: Any conventional loan with less than 20% down payment. No exceptions. PMI is mandatory until you reach 20% equity.
How much it costs: Typically 0.3% to 1.5% of loan amount annually (roughly $100-$400/month on a $400K loan). Cost depends on down payment size, credit score, and loan amount.
How to remove it: PMI automatically cancels at 22% equity, but you can request removal at 20% equity, refinance to drop it, or use home value appreciation to reach 20% faster.
Key takeaway: PMI is temporary, removable, and often worth it if it lets you buy sooner. The cost of waiting (rent + appreciation) often exceeds PMI costs. Think of PMI as a tool, not a penalty.
Buyers with 3-19% down who want to understand PMI costs and removal options before committing
Current homeowners paying PMI looking for strategies to remove it and lower monthly payments
Buyers comparing conventional vs FHA and trying to decide which mortgage insurance is better
Homeowners with rising home values in Nevada who may now qualify for PMI removal via reappraisal
Nevada buyers ready in 0-90 days who want accurate PMI cost projections before applying
Not ready to buy yet? Here's how to use this guide if you're still planning:
Use the PMI calculator to see how PMI affects your monthly budget at different down payment levels
Compare PMI vs FHA MIP to decide which loan type makes more financial sense
Review removal timelines to understand when you can realistically drop PMI
Save this page for when you're 60-90 days from buying and need accurate numbers
PMI explained in plain language: what it does, why it exists, and how it affects your mortgage.
PMI is an insurance policy that protects the lender (not you) if you default on your mortgage. It's required on conventional loans when you put down less than 20%.
The cost is added to your monthly mortgage payment. While you pay it, the benefit goes to the lender — it's their risk protection.
Key Point:
PMI lets you buy with less down. Without it, you'd need to save 20% before qualifying for a conventional loan — which could take years.
Lenders see higher risk when you put down less than 20%. If you default and the home goes to foreclosure, they may not recover the full loan amount.
PMI offsets this risk by reimbursing the lender for a portion of their loss. This allows them to approve loans with smaller down payments.
3-5% down: Highest PMI cost (highest risk)
10-15% down: Moderate PMI cost
20%+ down: No PMI required
PMI is expressed as an annual percentage of your loan amount, then divided by 12 for monthly payments. Three main factors determine your PMI rate:
Lower down payment = higher PMI rate
Higher score = lower PMI rate
PMI is a % of loan balance
PMI rates typically range from 0.3% to 1.5% annually. Exact rates vary by lender and are disclosed at application. Use the calculator below to estimate your PMI cost.
See exactly how much PMI adds to your monthly payment at different down payment levels.
PMI adds $4,656/year
PMI adds $3,420/year
PMI adds $2,160/year
PMI adds $1,356/year
Increasing your down payment from 5% to 15% cuts PMI by more than half ($285/mo → $113/mo). If you can afford a bit more down, the PMI savings add up quickly.
Even with PMI, buying now often beats waiting. If you rent for 2 years to save 20% down, you'll pay ~$30K+ in rent plus miss out on appreciation. PMI at $300/mo = $7,200/year — significantly less.
Assumptions: Good credit (720+), primary residence, 30-year fixed conventional loan. PMI rates shown are estimates. Actual rates vary by lender, credit score, and down payment. Does not include principal, interest, taxes, or insurance.
Step-by-step methods to eliminate PMI and save hundreds per month on your mortgage payment.
The easiest method: PMI cancels automatically when you reach 22% equity through regular payments.
Federal law (Homeowners Protection Act) requires lenders to automatically cancel PMI when your loan balance drops to 78% of the original home value
You don't need to do anything — cancellation is automatic
Must be current on payments (no 30-day late payments in past year)
Typical timeline on a $400K loan with 5% down:
Best for: Homeowners who prefer a hands-off approach and don't mind waiting 10+ years. If you want to remove PMI faster, use methods 2-5 below.
The fastest standard method: request PMI removal once you hit 20% equity through payments.
Check your loan balance. Calculate if you've reached 80% LTV (20% equity) based on original purchase price.
Contact your lender. Submit a written request to cancel PMI (call first to confirm exact requirements).
Provide proof. Most lenders require current mortgage statement and proof of no liens against property.
Wait for approval. Lender reviews (typically 30-45 days) and removes PMI if you meet requirements.
Loan balance at 80% or less of original value
Good payment history (no late payments)
No junior liens (second mortgages, HELOCs)
Quick Calculation:
$400K home × 80% = $320K loan balance needed for 20% equity removal
Best for: Homeowners who've paid down their loan to 20% equity and want PMI removed ASAP (2 years faster than automatic cancellation).
Use rising home values to reach 20% equity faster, even if you haven't paid down much principal.
If your home's value has increased significantly (common in Nevada's hot markets), you may have 20% equity even without paying down much principal.
Example:
Note: Most lenders require 2+ years of ownership before allowing reappraisal for PMI removal.
Best for: Nevada homeowners who bought 2-5 years ago in appreciating markets (Las Vegas, Henderson, Reno). Appreciation can give you 20% equity much faster than payments alone.
Accelerate your path to 20% equity by making additional principal-only payments each month.
Extra payments go straight to principal, building equity faster. Even small extra payments compound over time.
Example Impact:
Specify "principal only" when making extra payments (or lender may apply to interest)
Make payments monthly (not lump sum annually) for compounding effect
Track your progress — request loan balance updates quarterly
Keep 6mo emergency fund — don't drain savings to pay down PMI
Best for: Homeowners with extra cash flow who want to remove PMI in 3-5 years instead of 8-10 years. Only do this if you have emergency reserves.
Refinance into a new loan without PMI if home value has increased or you've paid down principal.
You have 20%+ equity (via appreciation or paydown) but lender won't remove PMI via reappraisal
Interest rates have dropped — refinance for lower rate AND drop PMI
PMI savings outweigh closing costs (typically if you plan to stay 2+ years)
Refinance costs:
Only refinance to drop PMI if the break-even is under 2 years or if you're also getting a lower rate.
Best for: Homeowners with significant equity gains who want to drop PMI immediately, especially if combining with a rate reduction. Learn about refinancing →
Deciding between conventional with PMI or FHA with MIP? Here's the honest comparison.
| Feature | Conventional PMI | FHA MIP |
|---|---|---|
|
Minimum Down Payment |
3-5% (qualified buyers) |
3.5% (if 580+ credit score) |
|
Insurance Cost |
0.3-1.5% annually Varies by credit/down payment |
0.55-0.85% annually Fixed rate regardless of credit |
|
Removable? |
✓ YES
Removable at 20% equity (or 22% auto) |
✗ NO
Permanent (life of loan in most cases) |
|
Credit Score Required |
620-680+ typically Higher score = lower PMI |
580+ for 3.5% down More flexible for lower credit |
|
Upfront Premium |
None |
1.75% of loan amount Usually rolled into loan |
|
Best For |
680+ credit, plan to reach 20% equity in 5-10 years |
Lower credit (580-679), less down payment saved |
Credit score 680+: You'll get better PMI rates and can remove it at 20% equity
Expecting home value appreciation: Nevada markets often appreciate fast, letting you drop PMI in 3-5 years
Planning to stay 7+ years: Long enough to benefit from PMI removal vs permanent FHA MIP
Credit score 580-679: FHA is more forgiving and MIP rate doesn't penalize lower credit as much
Need lowest possible down payment: FHA 3.5% down is easier to qualify for than conventional 3%
Planning to refinance in 3-5 years: Use FHA to buy now, refinance to conventional later when credit/equity improves
We'll show you side-by-side conventional vs FHA costs
Quick answers to the most common PMI questions.
Get a personalized quote with PMI estimates and see your path to removing it.
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Valley West Mortgage - NMLS #65506
Nevada Mortgage Lender License | In Business Since 2004
Licensed to conduct business in Nevada
Phone: (702) 696-9900 | Email: [email protected]
NMLS Consumer Access: www.nmlsconsumeraccess.org
We are an Equal Housing Lender. We do business in accordance with the Federal Fair Housing Law and Equal Credit Opportunity Act. This company does not discriminate on the basis of race, color, religion, national origin, sex, marital status, age, or handicap.
This is not a commitment to lend. All loans subject to credit approval. Rates, terms, and conditions are subject to change without notice. Not all applicants will qualify. Additional restrictions may apply. Property insurance required. Flood insurance may be required. This website is for informational purposes only and does not constitute financial advice. Consult with a licensed loan officer for personalized guidance.