To avoid private mortgage insurance (PMI) on a conventional loan, you need to put at least 20% down. On a $400,000 home that is $80,000 in cash up front, which brings your loan to $320,000 and your loan-to-value (LTV) ratio to 80%. Put down less than 20% and the lender almost always adds PMI to protect itself, costing you roughly $150 to $300 a month until you build enough equity.
This guide is about one thing: the cash you need up front to skip PMI, what it costs when you can't reach 20%, and how to get rid of PMI as fast as possible. To see the loan size and PMI impact for your own price, use the Down Payment Calculator.
What PMI is and why lenders charge it
PMI is an insurance premium you pay that protects the lender (not you) if you stop making payments. When you borrow more than 80% of the home's value, the lender sees more risk, so it requires PMI on conventional loans until your LTV drops to 80%. The premium is bundled into your monthly mortgage payment.
PMI is not a penalty or a scam. It is simply the price of buying with less cash down. The trade-off is real: a smaller down payment lets you buy sooner and keep more savings, but you pay PMI every month until you reach 20% equity.
The cash you need to hit 20% by home price
The 20% threshold scales directly with the home price, so a more expensive home requires far more cash to skip PMI. Here is the down payment and resulting loan at the 20% (no-PMI) mark versus a common 10% down option, with PMI estimated at 0.5% of the loan per year.
| Home price | 20% down (no PMI) | Loan at 20% | 10% down | Loan at 10% | Est. PMI at 10% down |
|---|---|---|---|---|---|
| $300,000 | $60,000 | $240,000 | $30,000 | $270,000 | ~$112/mo |
| $400,000 | $80,000 | $320,000 | $40,000 | $360,000 | ~$150/mo |
| $500,000 | $100,000 | $400,000 | $50,000 | $450,000 | ~$188/mo |
PMI rates vary by credit score, loan size, and down payment, and can run from roughly 0.3% to 1.5% of the loan per year. Lower credit and smaller down payments push the rate higher.
What PMI actually costs you over time
Because PMI stays until you reach 20% equity, the total bill can run into the thousands. Take a $400,000 home with 10% down: a $360,000 loan at a 6.5% rate. With PMI at 0.5% per year, that is $1,800 annually, or $150 a month.
Paying only the regular mortgage on that loan, your balance reaches the 80% LTV mark ($320,000) at about month 95, roughly 7.9 years in, assuming the home's value does not change. Over those 95 months at $150 a month, PMI costs about $14,250 total. If your PMI rate were 1.0% ($300/mo), the same period would cost about $28,500.
That is the price of buying with $40,000 down instead of $80,000. Whether it is worth it depends on how long it would take you to save the extra $40,000 and what your money could earn in the meantime.
How PMI cancels (and how to speed it up)
On a conventional loan, PMI does not last forever; federal rules under the Homeowners Protection Act give you two ways off.
- Request cancellation at 80% LTV. Once your balance reaches 80% of the home's original value, you can ask the lender in writing to cancel PMI. On the $400,000 example that is a $320,000 balance, reached around month 95 on schedule.
- Automatic termination at 78% LTV. The servicer must drop PMI automatically when the balance reaches 78% of the original value, provided you are current. On the example, $312,000 is reached around month 109 (about 9.1 years).
You can reach 80% sooner by making extra principal payments. Even a modest extra amount each month shaves years off the timeline; see how with the Extra Payment Mortgage Calculator. The exact rules are spelled out by the Consumer Financial Protection Bureau.
FHA is different: its mortgage insurance can last the life of the loan
FHA loans do not charge PMI; they charge their own mortgage insurance premium (MIP), and on most FHA loans with the minimum 3.5% down, MIP stays for the full loan term. An FHA loan also adds an upfront premium of 1.75% of the loan, usually financed into the balance.
On a $400,000 home with 3.5% down ($14,000), the base loan is $386,000. The 1.75% upfront MIP is about $6,755, and the annual MIP at roughly 0.55% is about $2,123 a year, or $177 a month. Unlike conventional PMI, that monthly premium does not cancel at 80% LTV on most FHA loans, so the only common way to remove it is to refinance into a conventional loan once you have 20% equity.
Should you wait for 20% or buy sooner and pay PMI?
There is no universal answer; it depends on how fast you can save, what homes are doing in your area, and what else your cash could do. Three honest points to weigh:
- PMI is removable. Conventional PMI is temporary, so paying it for a few years to buy now can beat renting for years while you scrape together a much larger down payment.
- Do not drain your safety net. Putting every dollar into 20% down can leave you house-rich and cash-poor. Keep a separate emergency fund after closing.
- Run both versions. Compare the monthly payment with and without PMI, and the cash each requires, using the Down Payment Calculator and the Mortgage Calculator.
The right move is the one that fits your full financial picture, not a rule of thumb applied blindly.
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Open the Down Payment Calculator →Frequently asked questions
- How much do I need to put down to avoid PMI?
- You need 20% of the purchase price down on a conventional loan to avoid PMI. On a $300,000 home that is $60,000; on a $400,000 home it is $80,000; on a $500,000 home it is $100,000. Putting down 20% brings your loan-to-value ratio to 80%, the level at which lenders no longer require PMI.
- How much does PMI cost per month?
- PMI typically costs about 0.3% to 1.5% of the loan amount per year, paid monthly. On a $360,000 loan, 0.5% is $1,800 a year or $150 a month, while 1.0% would be $3,600 a year or $300 a month. Your exact rate depends on your credit score, loan size, and how much you put down.
- When does PMI go away?
- On a conventional loan, you can request PMI cancellation once your balance reaches 80% of the home's original value, and the lender must remove it automatically at 78%. On a $400,000 home with 10% down at a 6.5% rate, the 80% point ($320,000 balance) arrives around month 95 on the regular schedule, with automatic termination near month 109.
- Can I get rid of PMI faster?
- Yes, you reach the 80% loan-to-value cancellation point sooner by paying down principal faster, either with extra monthly payments or a lump sum. A rising home value can also help, since cancellation at 80% can be based on current value with a new appraisal in many cases. Check the Extra Payment Mortgage Calculator to see the time saved.
- Does FHA charge PMI?
- No, FHA loans charge their own mortgage insurance premium (MIP) instead of PMI, plus a 1.75% upfront premium. On most FHA loans with the minimum 3.5% down, the annual MIP stays for the full loan term and does not cancel at 80% equity, so refinancing into a conventional loan is the common way to remove it once you have 20% equity.
- Is it worth putting 20% down just to avoid PMI?
- It depends on how long the extra cash would take to save and what your money could earn elsewhere. PMI on a $360,000 loan at 0.5% runs about $14,250 total before it cancels around year 8, so if saving the extra $40,000 would take many years of rising home prices, buying sooner and paying PMI can be the better choice. Run both scenarios before deciding.
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