Private mortgage insurance, or PMI, protects the lender, not you, if a loan with a small down payment goes bad. You pay for it anyway. For many Utah buyers it's one of the biggest costs that isn't principal, interest, taxes, or homeowner's insurance.
Here is how it's priced, how it differs by loan type, and how to avoid it or get it removed.
When you pay PMI
On a conventional loan, PMI usually applies when your loan is more than 80% of the home's value. In other words, you have less than 20% equity on day one.
It isn't a Utah rule. It's a feature of conventional loans everywhere. But with Utah home prices where they are, 20% equity is a lot to bring to the table, so most first-time buyers here start with some form of mortgage insurance.
How much PMI costs
PMI is priced as a yearly percentage of your loan amount, split into your monthly payment. A commonly cited range is roughly 0.3% to 1.5% of the loan amount per year.
Where you land in that range depends mostly on:
- Your credit score. Higher scores get noticeably lower PMI.
- Your equity. The closer you are to 20%, the lower the premium.
- Your debt-to-income ratio and the property type.
A quick rule for the math: every 0.1% of PMI costs about $100 a year for each $100,000 you borrow. Your Loan Estimate shows the exact figure, and our Utah mortgage calculator lets you see how it fits into your payment.
How mortgage insurance differs by loan type
| Loan type | What you pay | Does it go away? |
|---|---|---|
| Conventional | Monthly PMI | Yes, as your equity grows |
| FHA | Upfront premium of 1.75% of the loan, plus a monthly premium | Often lasts the life of the loan |
| USDA | Upfront guarantee fee plus a smaller annual fee | Lasts the life of the loan |
| VA | No monthly mortgage insurance; a one-time funding fee for most borrowers | Nothing monthly to remove |
| Doctor and professional loans | No monthly mortgage insurance | Nothing monthly to remove |
That last row surprises people. If you're a physician, dentist, physician assistant, nurse, attorney, or CPA, you may qualify for a doctor loan with no monthly mortgage insurance.
Ways to avoid PMI
- Start with 20% equity. The simplest route, if you can do it.
- Use a VA loan if you're a veteran, on active duty, or an eligible surviving spouse. See our VA loan page.
- Use a doctor or professional loan if your license qualifies.
- Ask about lender-paid mortgage insurance. The lender pays the premium in exchange for a somewhat higher rate. It can make sense if you plan to sell or refinance within a few years, but it doesn't go away later, so run the numbers both ways.
Ways to remove PMI later
Pay it down. Ask your servicer to cancel PMI once your balance reaches 80% of the original value. Extra principal payments get you there sooner.
Let it end on schedule. By federal law, PMI ends automatically when your balance is scheduled to reach 78% of the original value, as long as you're current on payments.
Use your home's new value. If your home has gone up in value, many servicers will remove PMI based on a new appraisal after a waiting period, often two to five years. Call your servicer first to learn their rules before you pay for an appraisal.
Refinance. If you have an FHA loan with mortgage insurance for the life of the loan, refinancing into a conventional loan once you have 20% equity is the usual way out. Use our refinance break-even calculator to see whether the savings cover the cost of refinancing.
Want to see your numbers?
Mortgage insurance is one of the line items we compare first when we look at a buyer's options. Book a free call and we'll show you what PMI, FHA, VA, or a professional loan would look like for your situation.