Private mortgage insurance, or PMI, is insurance arranged for many conventional mortgages when the borrower makes a smaller down payment or has less than the required equity. PMI protects the lender or mortgage investor if the borrower defaults. It does not protect the borrower’s credit or equity.
PMI can make a conventional loan available without 20 percent down. The cost and cancellation path depend on the loan, down payment, credit profile, property, occupancy, coverage level, payment structure, investor, and mortgage-insurance company.
The lender obtains coverage from a private mortgage-insurance company. If the mortgage goes into default and the lender suffers a covered loss, the insurer may pay the lender according to the policy. The borrower remains responsible for the loan, missed payments, foreclosure consequences, and any other legal obligations.
PMI does not:
PMI is commonly required for a conventional purchase when the first-mortgage loan-to-value ratio is above 80 percent, which generally corresponds to a down payment below 20 percent. It may also apply to a conventional refinance when the new first mortgage exceeds the lender’s no-PMI equity threshold.
Requirements can differ for:
| Structure | How it is paid | Main tradeoff |
|---|---|---|
| Monthly borrower-paid PMI | Added to the monthly mortgage payment | Limited upfront cost and potential future cancellation, but a higher monthly payment while coverage remains |
| Single-premium PMI | Paid in one amount at or before closing, sometimes through an eligible credit or financed structure | Lower monthly payment, but the upfront cost may not be fully recovered after an early sale or refinance |
| Split-premium PMI | Part upfront and part monthly | Balances upfront and monthly cost, subject to availability and cancellation terms |
| Lender-paid mortgage insurance | Lender pays the premium through the loan’s pricing, commonly with a higher interest rate | No separate monthly PMI line, but the higher rate generally remains unless the loan is refinanced or paid off |
Not every structure is available for every loan. Compare the expected loan life and total cost, not only the first payment.
Pricing can be affected by:
Ask for the actual quoted monthly or upfront amount. A generic percentage may not reflect your file.
| Feature | Conventional PMI | FHA mortgage insurance |
|---|---|---|
| Loan category | Conventional | FHA-insured |
| Pricing | Risk-based private-insurer pricing | FHA upfront and annual premium schedules |
| Removal | Federal cancellation and termination rights can apply, plus investor rules | Duration depends on FHA rules, original loan-to-value, term, and endorsement date |
| Credit effect | Cost can vary materially by credit profile | Annual premium is generally not priced like conventional PMI by individual credit score |
The lowest PMI amount does not determine which overall loan is better. Compare rate, APR, mortgage insurance, upfront costs, seller credits, property standards, down payment, and expected ownership timeline. See FHA Loans in Colorado.
A piggyback second mortgage can eliminate first-mortgage PMI but adds another loan, payment, rate, lien, and closing costs. Compare total risk and cost.
Federal law gives qualifying borrowers on covered loans rights to request cancellation at 80 percent of the home’s original value and generally requires automatic termination at 78 percent according to the original amortization schedule, provided applicable conditions are met. Final termination can also apply at the midpoint of the amortization period in certain situations.
Servicer, investor, seasoning, payment history, current value, and property-condition requirements can affect an early or current-value request. Read How to Remove Private Mortgage Insurance before ordering an appraisal or making a large principal payment.
The Loan Estimate and Closing Disclosure can show:
Read the mortgage-insurance disclosure and any cancellation notice provided at closing.
PMI is a cost, but it can allow a qualified buyer to purchase sooner or preserve cash. Evaluate the cost against rent, market risk, reserves, alternative loan structures, and the likely cancellation timeline.
No. It protects the lender or investor, not the borrower. Separate payment-protection products are different and should be reviewed carefully.
Monthly borrower-paid PMI on a covered conventional loan can often be cancelled or automatically terminated when statutory and investor requirements are satisfied. Lender-paid mortgage insurance is embedded in the rate and does not disappear as a separate line item.
The lender generally arranges the coverage and insurer. A mortgage broker may be able to compare eligible lender and insurer structures, but the borrower does not always select the carrier directly.
No. It can eliminate PMI, but it uses more cash. Compare reserves, other debt, investment goals, payment, rate, and the value of liquidity.
An eligible seller credit may sometimes cover an upfront or single-premium mortgage-insurance cost within program limits and available costs. It generally cannot create cash back or replace an ineligible source of minimum down payment.
Review the rate, down payment, mortgage-insurance structure, closing costs, reserves, monthly payment, and expected cancellation or refinance timeline.
Reviewed September 2, 2026 by Michael Shotnik, Broker | Owner, Milestone Home Mortgage, LLC, NMLS 218281. Educational information only. PMI eligibility, pricing, coverage, payment structures, cancellation, automatic termination, property requirements, and loan terms vary. Review the actual mortgage-insurance and servicing disclosures.
Updated August 31, 2026
Builder mortgage incentives in Colorado can create real value, but the advertised rate or credit is only one part of the transaction. A builder may offer a permanent rate buydown, a temporary buydown, closing-cost assistance, a price reduction, design-center upgrades, or a combination ...
Michael and Melissa are always a pleasure to work with. They are extremely responsive, professional and work hard to get the best loan for us. I would recommend Colorado Mortgage to anyone. Thank you for another great experience!
Milestone Home Mortgage LLC NMLS #2588937. Michael Shotnik NMLS: 218281, CO License: 100017466. Not licensed in Alaska or New York. To check license status of mortgage loan originator, visit D.O.R.A. and NMLS consumer access.
