What Is PMI and How Can I Avoid It?
By Jason Iacovelli, NMLS #3370 | Updated December 2025
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What is PMI (Private Mortgage Insurance)?
PMI is insurance that protects the lender if you default on your mortgage. It's required on conventional loans when you put down less than 20%, costing 0.5-1.5% of your loan amount annually ($100-$300/month on a $400,000 loan). PMI cancellation can be requested when eligibility requirements are met.
Key Takeaways
- PMI costs $100-$300/month on a $400,000 loan (0.5-1.5% annually)
- Required on conventional loans with less than 20% down payment
- You can request cancellation when your balance reaches 80% of the home’s original value, subject to eligibility requirements. PMI generally ends automatically when your loan balance is scheduled to reach 78% of the home’s original value, provided you’re current on payments.
- VA loans never have PMI; FHA loans have MIP instead
- Strategies to avoid: 20% down, VA loan, USDA loan, or piggyback loan
Private Mortgage Insurance (PMI) costs $100-$300 per month on a $400,000 loan and is required on conventional loans with less than 20% down payment. Buyers in Raleigh using conventional loans can request PMI cancellation when eligibility requirements are met, while veterans in Cary can avoid it entirely with VA loans.
How Much Does PMI Cost?
$400,000 Home, 5% Down
- Loan amount: $380,000
- PMI rate: 0.75% annually
- Monthly PMI: $238
- 5-year total: $14,250
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How Do I Remove PMI?
- You can request cancellation when your balance reaches 80% of the home’s original value, subject to eligibility requirements. PMI generally ends automatically when your loan balance is scheduled to reach 78% of the home’s original value, provided you’re current on payments.
- Home Appreciation: Order new appraisal if home value increased
- Extra Payments: Pay down principal faster to reach 20% equity sooner
- Refinance: If home value increased significantly
How Can I Avoid PMI Completely?
- Put 20% Down: $80,000 on $400K home
- Use VA Loan: 0% down, no PMI ever
- Use USDA Loan: 0% down in eligible areas
- Piggyback Loan: 80-10-10 structure avoids PMI
Jason Iacovelli
Licensed Mortgage Broker
Jason Iacovelli is a licensed mortgage broker serving the Raleigh-Durham Triangle area. With over two decades of experience, Jason specializes in helping buyers understand and minimize mortgage insurance costs.
Last reviewed and updated: December 31, 2025
Frequently Asked Questions About PMI
Get answers to common PMI questions