The Role of Private Mortgage Insurance Explained

What private mortgage insurance (PMI) is, who pays it, and how to remove it as your equity grows.

If you’re buying a home with less than 20% down, there’s a good chance you’ll come across private mortgage insurance—also known as PMI. It often appears in your monthly payments, yet many buyers don’t fully understand it. At Thompson Kane, we help buyers understand the financial side of homeownership—including what PMI is, when it applies, and how to remove it later.

Our loan officers are here to guide you through every step, from first questions to final payments. Let’s take a closer look at how private mortgage insurance works—and how it impacts your mortgage.

Private Mortgage Insurance Explained, Simply

PMI is insurance that protects the lender—not the borrower—if the buyer stops making mortgage payments. Most conventional loans require PMI when the down payment is less than 20% of the home’s purchase price.

While PMI adds to your monthly cost, it can help buyers enter the market sooner instead of waiting to save a larger down payment. For many, that trade-off is worth it.

Who Pays for PMI, and How Much Does It Cost?

Borrowers usually pay PMI as part of their monthly mortgage payment. The cost depends on several factors—like your credit score, loan type, and loan-to-value ratio—but it typically ranges from 0.3% to 1.5% of the original loan amount per year.

For example, on a $300,000 home with 10% down, PMI might cost anywhere from $75 to $375 per month. That’s why it’s important to work with a lender who helps you weigh those numbers and plan ahead. At Thompson Kane, we explain every cost clearly—so you always know what you’re paying for and why.

How to Remove PMI as You Build Equity

The good news is that PMI doesn’t last forever. Once your equity reaches 20% of your home’s value, you may be able to remove PMI. In most cases, lenders must cancel it automatically when your loan-to-value ratio reaches 78%, as long as you’re current on your payments.

You can also request removal earlier. If your home has appreciated or you’ve made extra payments toward your principal, you might reach 20% equity sooner than expected. In that case, you can ask your lender to cancel PMI. A new home appraisal may be required to prove your current value. A Thompson Kane loan officer can review your equity and help you make that request when the time comes.

Can You Avoid PMI Altogether?

Yes—if you put at least 20% down on a conventional mortgage, PMI won’t apply. Some borrowers also explore alternatives like an 80-10-10 loan, where a second mortgage helps reduce your primary loan-to-value ratio below 80%. However, these options come with added complexity and risks.

We’ll help you compare all available strategies and decide what fits your financial goals. Our team will never push you into one-size-fits-all answers. At Thompson Kane, we focus on helping you find a solution that balances cost, flexibility, and long-term value.

Why PMI Matters in Today’s Market

Understanding private mortgage insurance can make a real difference in your budget. PMI affects your monthly payment, your total loan cost, and even how quickly you build equity. That’s why it’s smart to talk through your options before closing—and again as your situation changes.

Our lending experts help you map a plan. Whether you’re buying your first home or refinancing, we’ll walk through your equity path, explore your options, and help you work toward removing PMI sooner—if possible.

Have questions about PMI or how it applies to your home loan? Reach out to a Thompson Kane loan officer today. We’re here to help you make confident, informed financial decisions—every step of the way.