What is PMI and Why Does It Exist?
Private Mortgage Insurance (PMI) is insurance that protects your lender if you default on your mortgage. It's typically required when you put down less than 20% on a conventional loan. While PMI adds to your monthly payment, it enables homeownership with smaller down payments—a crucial tool in 2025's expensive housing market.
🎯 2025 PMI Reality Check
With median home prices at $500K, a 20% down payment means $100,000 cash. PMI allows you to buy with $25K-50K down instead, getting you into homeownership 2-4 years earlier. For many, PMI isn't a cost—it's an investment in time.
Types of PMI
Monthly PMI (Most Common)
- • Added to your monthly mortgage payment
- • Can be removed when you reach 20% equity
- • Automatically canceled at 22% equity
- • Most flexible option
Upfront PMI
- • Pay entire premium at closing
- • Lower overall cost if you stay long-term
- • No monthly PMI payments
- • Not refundable if you refinance early
PMI Costs: What You'll Actually Pay in 2025
PMI costs vary based on your down payment, credit score, and loan amount. Here's what to expect with current market conditions:
| Down Payment | Credit Score 740+ | Credit Score 680-739 | Monthly Cost* |
|---|---|---|---|
| 5% Down | 0.85% | 1.15% | $340-460 |
| 10% Down | 0.75% | 0.95% | $300-380 |
| 15% Down | 0.65% | 0.85% | $260-340 |
*Based on $400K loan amount
💰 Real Example: $500K Home Purchase
- • Home Price: $500,000
- • Down Payment: $50,000
- • Loan Amount: $450,000
- • PMI Rate: 0.75%
- • Monthly PMI: $281
- • Home Price: $500,000
- • Down Payment: $25,000
- • Loan Amount: $475,000
- • PMI Rate: 0.85%
- • Monthly PMI: $337
Calculate Your PMI Costs Now
Use our mortgage calculator to see exactly what PMI will cost and when you can remove it.
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