Private Mortgage Insurance (PMI) is a type of insurance that homebuyers might need to purchase if they are unable to make a substantial down payment on their home. PMI protects the lender in case the borrower defaults on the loan. In this blog post, we’ll explain what PMI is, when it’s required, how it affects your mortgage payments, and how you can avoid or eliminate it. Plus, learn how working with us, your trusted mortgage brokers, can help you navigate PMI requirements.

What is Private Mortgage Insurance (PMI)?

PMI is an insurance policy provided by private insurers that protects lenders against loss if a borrower defaults on their mortgage. It is typically required for conventional loans when the borrower makes a down payment of less than 20% of the home’s purchase price.

When is PMI Required?

Lenders require PMI to mitigate the risk associated with low down payments. Here are the common scenarios when PMI is required:

  • Down Payment Less Than 20%: If your down payment is less than 20% of the home’s purchase price, most lenders will require you to carry PMI.
  • Refinancing with Less Than 20% Equity: If you’re refinancing your home and your equity is less than 20% of the home’s value, PMI may be required.

How PMI Affects Your Mortgage Payments

PMI is an additional cost added to your monthly mortgage payment. The cost of PMI varies based on several factors, including the size of your down payment, loan amount, and credit score. On average, PMI can range from 0.3% to 1.5% of the original loan amount per year.

For example, if you have a $200,000 mortgage with an annual PMI rate of 1%, you’ll pay an additional $2,000 per year, or about $167 per month.

How to Avoid or Eliminate PMI

Avoiding or eliminating PMI can save you a significant amount of money over the life of your loan. Here are some strategies:

  • Make a Larger Down Payment: The simplest way to avoid PMI is to make a down payment of 20% or more of the home’s purchase price.
  • Lender-Paid PMI: Some lenders offer lender-paid PMI, where they cover the cost of PMI in exchange for a slightly higher interest rate. This can lower your monthly payments, but it’s important to calculate the long-term costs.
  • Refinance: Once you have 20% equity in your home, you can refinance your mortgage to eliminate PMI. Keep in mind that refinancing involves closing costs, so it’s important to weigh the savings against the costs.
  • Automatic Cancellation: By law, lenders must automatically cancel PMI when your loan balance reaches 78% of the original home value, as long as you are current on your payments.
  • Request PMI Cancellation: Once your loan balance reaches 80% of the original home value, you can request your lender to cancel PMI. You may need to provide a new appraisal to confirm your home’s value.

How We Can Help

Navigating PMI requirements can be complex, but working with us as your trusted mortgage brokers can simplify the process. Here’s how we can assist:

  • Expert Advice: We’ll explain the PMI requirements and how they apply to your specific situation, ensuring you understand all your options.
  • Customized Solutions: We’ll help you explore different strategies to avoid or eliminate PMI based on your financial goals and circumstances.
  • Access to Multiple Lenders: With connections to various lenders, we can offer a range of loan products that may include options to avoid PMI.
  • Streamlined Process: We’ll guide you through the entire mortgage process, from application to closing, ensuring a smooth and efficient experience.


Private Mortgage Insurance (PMI) is a common requirement for homebuyers with low down payments, but it doesn’t have to be a permanent cost. By understanding how PMI works and exploring strategies to avoid or eliminate it, you can save money and make the most of your home investment. Working with us as your trusted mortgage brokers provides additional support and guidance, helping you navigate PMI requirements with confidence.

Ready to explore your mortgage options and find ways to avoid or eliminate PMI? Contact us today, and let’s make your homeownership dreams a reality.