PMI Thresholds & Removal Guide
When PMI is required, how rates vary by credit score and LTV, and strategies to remove it
Key Numbers
Required
<20% Down
Annual Cost
0.3–1.5%
Request Removal
80% LTV
Auto-Terminates
78% LTV
Private Mortgage Insurance (PMI) is required on conventional loans when your down payment is less than 20% of the home's purchase price. PMI protects the lender—not you—if you default. The Homeowners Protection Act (HPA) of 1998 establishes your federal rights around PMI cancellation.
Key LTV Thresholds
| Threshold | LTV | What Happens |
|---|---|---|
| PMI Required | >80% | Down payment less than 20% |
| Borrower-Requested Cancellation | 80% | You can request PMI removal (written request + requirements) |
| Automatic Termination | 78% | Lender must cancel PMI (HPA law) |
| Final Termination | Any | Midpoint of loan term (year 15 of a 30-year), regardless of LTV |
LTV = Loan-to-Value Ratio. An 80% LTV means you've borrowed 80% of the home's value (20% down payment). The 80% and 78% thresholds are based on the original property value, not current market value.
PMI vs. FHA Mortgage Insurance (MIP)
| Feature | PMI (Conventional) | MIP (FHA) |
|---|---|---|
| Required When | Down payment <20% | All FHA loans |
| Upfront Premium | None (usually) | 1.75% of loan |
| Annual Premium | 0.3%–1.5% | 0.45%–1.05% |
| Cancellable? | Yes, at 80% LTV | No (life of loan)* |
| Credit Score Impact on Rate | Significant | Minimal |
*FHA loans originated after June 3, 2013 with less than 10% down require MIP for the life of the loan. Loans with 10%+ down can remove MIP after 11 years.
PMI Rates by Credit Score & LTV
PMI rates depend primarily on credit score and loan-to-value ratio. Rates shown are annual percentages of the original loan amount, based on Fannie Mae/Freddie Mac guidelines.
| Credit Score | 97% LTV (3% down) | 95% LTV (5% down) | 90% LTV (10% down) | 85% LTV (15% down) |
|---|---|---|---|---|
| 760+ | 0.38% | 0.30% | 0.19% | 0.15% |
| 740–759 | 0.52% | 0.41% | 0.27% | 0.21% |
| 720–739 | 0.69% | 0.54% | 0.36% | 0.28% |
| 700–719 | 0.85% | 0.67% | 0.45% | 0.35% |
| 680–699 | 1.05% | 0.83% | 0.56% | 0.44% |
| 660–679 | 1.25% | 1.03% | 0.69% | 0.55% |
| 640–659 | 1.45% | 1.20% | 0.82% | 0.65% |
| 620–639 | 1.55% | 1.35% | 0.95% | 0.75% |
Monthly Cost on a $400,000 Loan
| Scenario | PMI Rate | Monthly | Annual |
|---|---|---|---|
| 760+ score, 15% down | 0.15% | $50 | $600 |
| 760+ score, 5% down | 0.30% | $100 | $1,200 |
| 720 score, 10% down | 0.36% | $120 | $1,440 |
| 680 score, 5% down | 0.83% | $277 | $3,320 |
| 620 score, 3% down | 1.55% | $517 | $6,200 |
PMI Payment Types
| Type | How It Works | Cancellable? |
|---|---|---|
| Borrower-Paid (BPMI) | Monthly premium added to mortgage payment; most common option | Yes, at 80% LTV |
| Lender-Paid (LPMI) | Lender covers PMI in exchange for higher interest rate (typically +0.25%–0.5%) | No — refinance only |
| Single-Premium (SPMI) | Full PMI cost paid upfront at closing (1%–2% of loan); can be financed into loan | Non-refundable |
Credit score matters: A borrower with a 680 score pays over $2,000/year more in PMI than someone with a 760+ score on the same loan with 5% down.
PMI Removal Rules
The Homeowners Protection Act (HPA) of 1998 gives you specific rights around PMI cancellation. These thresholds are based on the original property value and the original amortization schedule, not current market value.
Federal PMI Removal Rights
| Removal Type | LTV | Requirements |
|---|---|---|
| Borrower-Requested | 80% | Written request, current on payments, good history, no subordinate liens, may need appraisal |
| Automatic Termination | 78% | Lender must cancel; based on original amortization schedule; must be current |
| Final Termination | Any | Midpoint of loan term (year 15 of 30-year); must be current; applies regardless of LTV |
Typical PMI Removal Timeline (30-Year Fixed at 6.5%)
| Down Payment | Starting LTV | Years to 80% (Request) | Years to 78% (Auto) |
|---|---|---|---|
| 3% | 97% | ~11 years | ~12 years |
| 5% | 95% | ~9 years | ~10 years |
| 10% | 90% | ~6 years | ~7 years |
| 15% | 85% | ~3 years | ~4 years |
Minimum-payment schedule only. Extra payments or home appreciation can accelerate removal.
Removal via Home Appreciation
If your home has increased in value, you may qualify for early PMI removal with a new appraisal ($300–$500). The required LTV depends on loan age:
| Loan Age | Required LTV | Notes |
|---|---|---|
| 2–5 years | ≤75% | Stricter threshold; new appraisal required |
| 5+ years | ≤80% | Standard threshold; new appraisal required |
To request cancellation: Submit a written request to your loan servicer, ensure no 30-day late payments in the past 12 months, no subordinate liens, and be prepared to pay for a new appraisal.
PMI Alternatives
Several strategies can reduce or eliminate mortgage insurance costs. Each involves trade-offs around eligibility, interest rates, and long-term cost.
| Strategy | How It Works | Key Trade-Off |
|---|---|---|
| 20% Down Payment | Eliminates PMI entirely; more equity from day one | Requires significant savings; less liquid cash after closing |
| Piggyback Loan (80/10/10) | First mortgage at 80% LTV + second mortgage for 10% + 10% down — avoids PMI trigger | Higher combined interest rate; two loan payments; harder to qualify |
| VA Loan | No PMI, no down payment required; funding fee of 1.25%–3.3% (can be financed) | Veterans, active military, and eligible spouses only |
| USDA Loan | No PMI, no down payment; 1% upfront guarantee fee + 0.35% annual fee | Rural areas only; income limits apply; annual fee for life of loan |
| Lender-Paid PMI | Lender covers PMI in exchange for permanently higher rate (+0.25%–0.5%) | Cannot be cancelled; often costs more than BPMI over life of loan |
| Single-Premium PMI | Pay 1%–2% of loan amount upfront at closing to avoid monthly PMI | Non-refundable if you sell or refinance early |
PMI Trade-Off Framework
Paying PMI May Make Sense
Home prices are rising faster than you can save, you have excellent credit (lowering your rate), you can remove PMI within 3–5 years, or your rent currently exceeds what mortgage + PMI would cost.
Consider Waiting
You're close to saving 20%, your credit score needs improvement (which would lower your PMI rate significantly), home prices are flat or declining in your market, or you can reach 20% within 1–2 years.
Run the numbers: Compare the total cost of paying PMI for several years vs. waiting to save 20%. Factor in home price appreciation, rent payments, and potential interest rate changes.
This content is for educational and informational purposes only and does not constitute financial, tax, or legal advice. Consult a qualified professional for guidance tailored to your situation.