Real Estate Investing Glossary

Private Mortgage Insurance (PMI)

Last reviewed July 15, 2026

PMI is insurance a borrower pays on conventional loans above 80% LTV; it protects the lender against default, not the borrower.

What is private mortgage insurance?

Private mortgage insurance (PMI) is required on most conventional mortgages when the down payment is less than 20% (loan-to-value above 80%). Despite being paid by the borrower, the policy protects the lender: if the borrower defaults and the foreclosure sale falls short, the insurer covers part of the lender’s loss.

PMI typically costs 0.3% to 1.5% of the loan balance per year, paid monthly, with the rate driven by credit score, LTV, and loan type. On a $250,000 loan a mid-range 0.7% premium adds about $146 per month. Borrowers can request cancellation once the balance reaches 80% of the original value, and lenders must auto-terminate it at 78% on schedule.

PMI is not automatically bad for investors. Putting less down and paying PMI can produce a higher cash-on-cash return if the property’s yield exceeds the all-in financing cost, and house hackers routinely accept temporary PMI to buy multifamily property with 3.5% to 5% down. FHA loans carry their own version (MIP) which, unlike PMI, usually cannot be cancelled without refinancing.

Worked example

You buy a $300,000 house hack duplex with 5% down, leaving a $285,000 loan at 95% LTV. At a 0.8% annual PMI rate, you pay about $190 per month. Once appreciation and paydown bring the balance to 80% of value, you can petition to remove PMI and keep the $190.

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Frequently asked questions

How do I get rid of PMI?: Three main routes: request cancellation when your loan balance hits 80% of the home’s original value (lenders must auto-cancel at 78%); ask for early removal based on a new appraisal showing appreciation or improvements pushed you below 80% LTV (most lenders allow this after two years of payments); or refinance into a new loan below 80% LTV. FHA mortgage insurance usually requires the refinance route.
Is paying PMI ever worth it for an investor?: Often, yes. PMI is the price of leverage: if putting 5% down instead of 20% frees up $45,000 that earns more elsewhere, or lets a house hacker buy years sooner, a $150 to $250 monthly premium can be a good trade. Run the numbers both ways, the deciding factor is whether the return on the preserved cash exceeds the PMI cost.

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What is private mortgage insurance?

Frequently asked questions

How do I get rid of PMI?

Three main routes: request cancellation when your loan balance hits 80% of the home’s original value (lenders must auto-cancel at 78%); ask for early removal based on a new appraisal showing appreciation or improvements pushed you below 80% LTV (most lenders allow this after two years of payments); or refinance into a new loan below 80% LTV. FHA mortgage insurance usually requires the refinance route.

Is paying PMI ever worth it for an investor?

Often, yes. PMI is the price of leverage: if putting 5% down instead of 20% frees up $45,000 that earns more elsewhere, or lets a house hacker buy years sooner, a $150 to $250 monthly premium can be a good trade. Run the numbers both ways, the deciding factor is whether the return on the preserved cash exceeds the PMI cost.