Private mortgage insurance (PMI) on a conventional loan typically costs between 0.46% and 1.50% of your original loan amount per year. On a $300,000 mortgage, that translates to roughly $1,380 to $4,500 annually, or $115 to $375 added to your monthly payment. Your exact rate depends mainly on your credit score and how much you put down.
How Credit Score Affects Your PMI Rate
Your credit score is the single biggest factor in what you’ll pay for PMI. Borrowers with lower scores represent more risk to the insurer, so they pay significantly higher premiums. Here’s how average annual PMI rates break down by credit score, based on data from the Urban Institute’s Housing Finance Policy Center:
- 620 to 639: 1.50% per year
- 640 to 659: 1.31% per year
- 660 to 679: 1.23% per year
- 680 to 699: 0.98% per year
- 700 and above: Rates continue to drop, reaching as low as 0.46%
To put those numbers in perspective, a borrower with a 630 credit score on a $250,000 loan would pay about $3,750 per year in PMI ($312 per month). A borrower with a 700-plus score on the same loan might pay $1,150 per year ($96 per month). That’s a difference of more than $200 every month, just from the credit score gap. If you’re close to a higher tier, improving your score before applying could save you thousands over the life of the insurance.
How Your Down Payment Changes the Cost
PMI is required on conventional loans whenever your down payment is less than 20% of the home’s purchase price. The less you put down, the more you’ll pay for PMI, because the lender’s risk increases as your ownership stake shrinks.
A borrower putting 5% down will pay a noticeably higher PMI rate than one putting 15% down, even if both have identical credit scores. This is because the loan-to-value ratio (LTV), which measures how much you owe compared to the home’s value, is the other key pricing factor. At 5% down, your LTV is 95%. At 15% down, it’s 85%. Mortgage insurers use both your credit score and your LTV together to set your premium, so improving either one lowers your cost.
If you can stretch from a 5% down payment to 10%, you’ll likely see a meaningful reduction in your monthly PMI charge. And if you can reach 20%, you skip PMI entirely.
Three Ways to Pay for PMI
Most borrowers pay PMI as a monthly premium rolled into their mortgage payment, but that’s not the only option. There are three common structures, each with different trade-offs.
Monthly Borrower-Paid PMI
This is the standard approach. Your mortgage insurer charges an annual premium divided into 12 monthly installments, which your loan servicer collects alongside your principal, interest, taxes, and homeowners insurance. The key advantage is that you can cancel it once you build enough equity (more on that below). The downside is that monthly PMI premiums are no longer tax-deductible as of the 2021 tax year.
Single-Premium PMI
Instead of paying monthly, you pay the entire PMI cost upfront at closing as a lump sum. This eliminates the monthly charge and can lower your total cost if you plan to stay in the home for many years. The trade-off is a much larger amount due at closing, and if you sell or refinance early, you won’t get that money back.
Lender-Paid PMI
With lender-paid mortgage insurance (LPMI), the lender covers the PMI cost in exchange for charging you a higher interest rate on the loan. You won’t see a separate PMI line item on your monthly statement, and the slightly higher rate may still produce a lower total monthly payment than standard PMI would. However, there’s a significant catch: unlike borrower-paid PMI, you cannot cancel LPMI. That higher interest rate stays for the life of the loan unless you refinance. If you plan to stay in the home long enough to build 20% equity relatively quickly, borrower-paid PMI is usually cheaper in the long run because you can drop it. LPMI tends to make more sense if your credit score would result in an especially high monthly PMI premium.
One tax benefit of LPMI: because the cost is embedded in your interest rate, it’s deductible as part of your mortgage interest if you itemize your taxes.
When PMI Goes Away
For borrower-paid PMI (either monthly or single-premium), federal law gives you clear rights to get rid of it. The rules come from the Homeowners Protection Act, and your loan servicer is legally required to follow them.
You can request cancellation in writing once your principal balance is scheduled to reach 80% of the home’s original value. If you’ve been making extra payments and hit that 80% mark ahead of schedule, you can request cancellation early. To qualify, you need to be current on your payments, have a good payment history, certify that you don’t have a second mortgage or other junior lien on the property, and provide evidence (typically a new appraisal) that your home’s value hasn’t declined below its original purchase price.
If you never request cancellation, your servicer must automatically terminate PMI once your principal balance is scheduled to reach 78% of the original value, as long as you’re current on payments. There’s also a final backstop: your servicer must end PMI when you reach the midpoint of your loan’s amortization schedule, regardless of your remaining balance. For a 30-year mortgage, that midpoint is after 15 years.
Note that these rules are based on the home’s original value at purchase, not its current market value. If your home has appreciated significantly, you may be able to request a new appraisal and use the updated value to demonstrate you’ve reached 20% equity sooner than the original payment schedule would suggest. Your servicer’s specific requirements for this process may vary, so ask about their procedures.
Calculating Your Actual PMI Payment
To estimate your own PMI cost, start with your loan amount (not the purchase price). Multiply it by the annual PMI rate that matches your credit score range, then divide by 12 for your monthly payment.
For example, say you’re buying a $350,000 home with 10% down. Your loan amount is $315,000. With a credit score of 670, your estimated PMI rate is about 1.23%. That works out to $3,875 per year, or roughly $323 per month. If you raised your score to 700 and qualified for a 0.70% rate instead, the same loan would cost about $2,205 per year, or $184 per month. That $139 monthly savings adds up to over $1,600 per year.
Keep in mind that PMI is temporary. On a $315,000 loan with a 30-year term at current rates, you’d typically reach the 80% LTV threshold within 8 to 11 years through regular payments alone, depending on your interest rate. Extra payments or home price appreciation can shorten that timeline considerably.