Private mortgage insurance is the fee your lender charges you to protect themselves against you defaulting when you put less than 20% down. It shows up in your monthly mortgage bill for years, has nothing to do with your homeowner's insurance, and — critically — you can shed it once you build enough equity. Most rent-vs-buy calculators either ignore PMI entirely or model it as one flat number forever. Neither is right.
Here is what it is, what it actually costs, and how to get rid of it as fast as the law allows.
What PMI is (and is not)
PMI is a monthly insurance premium your lender adds to your mortgage payment when your loan-to-value ratio (LTV) is above 80%. In plain English: whenever your down payment is less than 20% of the purchase price on a conventional loan, you pay PMI. It is not homeowner's insurance (that protects your house from fire, wind, and theft), and it is not mortgage life insurance (that pays off your mortgage if you die). PMI pays your lender if you stop paying.
The trade PMI buys you is real: it lets you enter the market with 5% or 10% down instead of waiting years to save 20%. Whether that trade is worth it depends on the math in the rest of this piece — and on the specific alternative you'd do with the same cash. We cover that head-on in the 5% down vs 20% down piece.
A quick vocabulary check, because the paperwork is confusing:
- BPMI (borrower-paid PMI). The standard case. Paid monthly, added to your mortgage payment.
- LPMI (lender-paid PMI). The lender "pays" PMI in exchange for a permanently higher interest rate. You never see a PMI line item — but you also can't cancel it without refinancing.
- Single-premium PMI. You pay the full PMI cost as a lump sum at closing (or roll it into the loan). No monthly line item, no cancellation to worry about, but a bigger hit up front.
- FHA MIP is not PMI, it just plays the same role for FHA loans. It's harder to shed — on most modern FHA loans it lasts the life of the loan unless you refinance out of the FHA program. Same idea, worse deal.
This piece focuses on BPMI on a conventional loan, because that's what the vast majority of low-down-payment buyers pay.
What you actually pay: the credit score table
PMI cost is quoted as an annual percentage of the loan balance (not the home price), then divided by 12 for the monthly premium. The rate lenders charge is driven almost entirely by two variables: your credit score and your LTV.
Here is a realistic 2026 range, using premium rates from the two dominant private mortgage insurers (MGIC and Enact/Genworth) as reported in their published rate cards. Actual quotes vary by lender, mortgage insurer, and property type, but this is the honest ballpark:
| Credit score | Annual PMI rate (5% down / 95% LTV) | Annual PMI rate (10% down / 90% LTV) |
|---|---|---|
| 760+ | 0.19% – 0.30% | 0.15% – 0.24% |
| 740 – 759 | 0.28% – 0.42% | 0.20% – 0.32% |
| 720 – 739 | 0.42% – 0.60% | 0.28% – 0.44% |
| 700 – 719 | 0.60% – 0.85% | 0.44% – 0.65% |
| 680 – 699 | 0.85% – 1.15% | 0.65% – 0.90% |
| 660 – 679 | 1.15% – 1.55% | 0.95% – 1.30% |
| 620 – 659 | 1.55% – 2.20% | 1.30% – 1.85% |
Source: MGIC and Enact 2025 rate cards, generalized to a range because insurers repriced twice in 2025.
Two facts worth flagging in that table. First, the difference between an 800 credit score and a 660 credit score at 5% down is roughly 6x in annual PMI cost. A 40-point credit swing can double your PMI. Second, moving from 5% down to 10% down cuts your PMI rate by roughly a third at every credit score band — because your LTV falls from 95% to 90%, and insurers price the tail risk sharply.
What that costs in dollars, on a $400,000 house
Take a $400,000 purchase, 5% down ($20,000), $380,000 loan. A 760+ credit score gets you PMI at roughly 0.25% of loan balance per year — call it $950/year, or about $79/month.
Now do the same house with a 680 credit score: PMI is closer to 1.0% annually — about $3,800/year, or $317/month. On the exact same house, with the exact same down payment.
At 10% down ($40,000 down, $360,000 loan), the same 760+ borrower pays about 0.20% — around $60/month. The same 680 borrower pays about 0.75% — around $225/month.
The takeaway is not "PMI is expensive" or "PMI is cheap." The takeaway is that PMI is your credit report expressed as monthly rent to the mortgage insurer, and the range between the best and worst PMI quotes on the same house is thousands of dollars per year.
When it goes away: the two rules that matter
You do not pay PMI forever. There are two federal rules that force cancellation, plus one voluntary path.
Automatic termination happens the month your scheduled loan balance is projected to hit 78% LTV based on the original purchase price and your amortization schedule. Your lender is required by the Homeowners Protection Act of 1998 to drop PMI at that point automatically — no application, no appraisal, no fee. This is the default path most borrowers take.
Borrower-requested cancellation happens when your scheduled loan balance hits 80% LTV based on the original price. You have to ask in writing, and your servicer usually requires you to be current on payments and may require an appraisal to confirm you have not damaged the property. This is the same rule set, one small step earlier.
Voluntary cancellation via appreciation. If your home has appreciated enough that your current market value would put you at or below 80% LTV, you can request PMI removal after a certain seasoning period (typically 2 years for the 80% test, 5 years for the 75% test). Your servicer will require a new appraisal at your cost — usually $500–$700 — and Fannie Mae / Freddie Mac guidelines govern whether they honor the request. This path is real but not automatic, and lenders push back on it.
The number that matters for the math is not "when PMI goes away in theory." It is "when PMI goes away for you, based on your amortization schedule and your realistic view of home prices in your metro."
Total lifetime PMI cost at 5% and 10% down
Now the honest arithmetic. Assume that same $400,000 house, a 30-year fixed loan at 6.75% (roughly the Freddie Mac PMMS average for 2026 to date), and a 760+ credit score. How much PMI do you pay before it drops?
5% down scenario: Loan starts at $380,000 (95% LTV). Automatic termination hits at 78% LTV, which on the amortization schedule is around month 122 — a little over 10 years in. At $79/month, that is ~$9,600 in PMI paid over 10 years before automatic termination. If you cancel voluntarily at 80% LTV (month 108, or 9 years in), you paid ~$8,500.
10% down scenario: Loan starts at $360,000 (90% LTV). 78% LTV hits around month 84 — about 7 years in. At $60/month, that is ~$5,000 in PMI paid.
Add appreciation and everything changes. If the house appreciates 3% a year — roughly the S&P/Case-Shiller long-run real rate plus a bit of inflation — you'd hit the 80% market-value threshold well before the amortization schedule does. On the 5% down scenario, 3%/year appreciation gets you to 80% market LTV in about 4 years, and to the 75% market threshold in about 6 years. Whether you actually get PMI dropped that early depends on your servicer honoring the appraisal-based request.
The realistic total range for a 760+ credit score at 5% down on a $400,000 house is $4,000 to $10,000 in lifetime PMI. At a 680 credit score, that same range roughly quadruples: $16,000 to $40,000. Same house.
What actually matters for the rent-vs-buy decision
Three practical rules once you understand the mechanics:
Model PMI as a limited-duration expense, not a permanent one. A calculator that keeps PMI in the payment for the full 30 years is overstating the cost of ownership by thousands of dollars. Ours amortizes it correctly to the 78% LTV termination point.
Your credit score is a bigger PMI lever than your down payment size. Fixing a 680 score into a 740 score before you apply can save you more PMI than pushing your down payment from 5% to 10%. The affordability piece covers how to think about that trade-off in the broader budget.
Waiting for 20% down to avoid PMI is often not the winning move. Every year you save while renting is a year of missed appreciation and paid rent. The full break-even math is in the 5% down vs 20% down piece, but the short version: at 6–7% mortgage rates and 3–5% appreciation, PMI usually pays for itself in year-two housing-equity gains alone. It is not always the villain.
The honest one-line summary: PMI is a short-lived, avoidable-in-time surcharge on the lender's risk, not a permanent cost of buying. Model it that way and it usually loses its scariness.
Ready to see what PMI does to your specific numbers? Try the rent-vs-buy calculator → — the PMI line is a top-level input, defaulted from the credit score you enter, and it drops out of the model at the correct LTV milestone automatically.