PMI, Decoded: What It Costs and When It Goes Away

Last reviewed September 28, 2026

Private mortgage insurance — PMI — is what conventional borrowers pay when they put down less than 20%. It protects the lender, not the buyer, and it costs roughly 0.5% to 1.5% of the loan amount per year depending on your down payment and credit (CFPB-cited industry range). On a $405,000 loan that is about $169 to $506 a month. It is not permanent: under the Homeowners Protection Act, you can request it removed at 80% loan-to-value, and the lender must drop it automatically once the loan hits 78% of the home's original value.

This page shows how the number is calculated, when the law requires it to end, and how the GeniusRealty mortgage and rent-vs-buy calculators model it — with the sources shown, not asserted.

What PMI actually costs

PMI is an annual percentage of the loan balance, billed monthly. Two factors drive where you land in the range:

Down payment (LTV). The less you put down, the higher the LTV, and the more the insurer charges. A 15% down payment carries lower PMI than 5%.
Credit score. This has the largest impact. Borrowers with strong scores pay meaningfully less than those with scores under 680.

The typical range is 0.5%–1.5% of the loan per year; depending on credit and LTV it can run as low as ~0.3% or above 2.0%. Your lender must show the exact estimated premium on page 1 of your Loan Estimate and Closing Disclosure.

The math example: $450K home, 10% down

The calculator's scenario, walked with its default rate (7.03%):

Home price: $450,000
Down payment: 10% = $45,000
Loan: $405,000 (90% LTV — PMI applies, since LTV exceeds 80%)
Monthly P&I at 7.03%: $2,702.64

PMI on the $405,000 loan, at a few points in the range:

Annual PMI rate	Monthly PMI	Annual PMI
0.5%	$168.75	$2,025
0.6% (calculator default)	$202.50	$2,430
1.0%	$337.50	$4,050
1.5%	$506.25	$6,075

So the honest statement is a band, not a single number: at 10% down on a $405,000 loan, PMI runs roughly $169–$506 a month (about $202 at the calculator's 0.6% mid-range default), on top of the $2,703 P&I. The GeniusRealty mortgage calculator uses the flat 0.6% default with the caveat shown in the model: actual quotes vary by credit score and LTV.

How PMI goes away: the Homeowners Protection Act

The Homeowners Protection Act (1998) sets the rules for conventional loans. There are three milestones:

Request at 80% LTV. Once your balance reaches 80% of the home's original value — based on the original sales price or appraised value — you can ask the lender in writing to cancel PMI. You generally need a good payment history and no subordinate liens.
Automatic at 78% LTV. The lender must terminate PMI automatically, with no request, when the balance is scheduled to reach 78% of the original value on the amortization schedule — provided you're current on payments. No fees allowed.
Final by midpoint. If neither applies sooner, PMI must end at the midpoint of the loan (year 15 of a 30-year mortgage).

Note what “original value” means: the HPA ties these to the home's value at origination, not to market appreciation. If your home has appreciated and you want PMI gone sooner, that's a borrower-request path with an appraisal — separate from the automatic rule.

When to request removal vs. wait for auto-cancel

On the example loan ($405,000 at 7.03%), here is how the milestones land on the amortization schedule:

Balance crosses 80% of $450,000 ($360,000) at month 101 — about year 8.4 → earliest point you can request cancellation.
Balance crosses 78% ($351,000) at month 116 — about year 9.7 → automatic termination.

That's roughly 15 months between the earliest request and the automatic drop. At the calculator's 0.6% default ($202.50/mo), requesting at 80% instead of waiting would save about $3,000 — if you're current and your lender agrees. The catch, honestly stated: the request path requires the borrower to act (in writing) and to meet the payment and lien conditions, and the automatic path removes that burden but runs later. FHA loans (MIP) and lender-paid PMI follow different rules, so the HPA milestones apply to conventional loans with borrower-paid PMI.

What to do with this

If you're shopping with less than 20% down, treat PMI as a line item you can size, not a mystery fee: it's 0.5%–1.5% of the loan per year, it appears in your Loan Estimate, and it has a scheduled end. The calculators model it transparently — the rent-vs-buy tool includes PMI while the balance exceeds 78% of the original value, and the mortgage calculator shows it in the monthly breakdown.

Open the mortgage calculator →

See the full monthly payment, PMI included, with the rate sourced from Freddie Mac PMMS.

Model your payoff with extra payments →

The same amortization schedule decides when PMI ends — simulate prepayments that pull the 78% date closer.

Sources

This is an explanation of how PMI works, not mortgage advice. Quotes vary by lender, credit, and LTV; verify your actual premium on your Loan Estimate. Figures checked 2026-09-25.