What is PMI and when is it required?

Private Mortgage Insurance (PMI) is required by lenders when you put less than 20% down on a conventional loan. It protects the lender if you default on the loan.

How much does PMI cost in South Carolina?

PMI typically costs between 0.5% and 2% of your total loan amount per year, added to your monthly mortgage payment.

How do I remove PMI from my mortgage?

For conventional loans, you can request PMI removal once you reach 20% equity. It's automatically cancelled at 22% equity. Refinancing is another option if your home value has increased.

What is the difference between PMI and FHA MIP?

PMI applies to conventional loans and can be removed at 20% equity. FHA MIP applies to FHA loans and typically lasts for the life of the loan if you put less than 10% down.

Understanding PMI & MIP

Everything you need to know about Private Mortgage Insurance (PMI) and Mortgage Insurance Premium (MIP)—what they are, why they're required, and how you can manage or remove them.

Private Mortgage Insurance (PMI)

For Conventional Loans

What is PMI?

Private Mortgage Insurance (PMI) is a type of insurance required by lenders when a borrower makes a down payment of less than 20% on a conventional loan. It protects the lender—not the borrower—in case of a loan default.

How Much Does It Cost?

PMI costs typically range from 0.5% to 2% of the total loan amount annually. The exact cost depends on your loan amount, credit score, and down payment size. This cost is usually added to your monthly mortgage payment.

PMI vs MIP

PMI is specific to Conventional loans. Government-backed loans like FHA have their own version called Mortgage Insurance Premium (MIP), which has different rules and often lasts for the life of the loan.

How to Remove PMI

For conventional loans, you can request to have PMI removed once you've reached 20% equity in your home. It's automatically terminated when you reach 22% equity. Refinancing can also be an option to remove PMI if your home's value has increased.

Mortgage Insurance Premium (MIP)

For FHA Loans

Upfront MIP

FHA loans require an upfront mortgage insurance premium of 1.75% of the loan amount, typically rolled into the loan balance.

Annual MIP

Annual MIP ranges from 0.45% to 1.05% of the loan amount, divided into 12 monthly payments based on loan-to-value ratio and loan term.

MIP Duration

For loans with 10% or more down payment: MIP is removed after 11 years. For loans with less than 10% down: MIP remains for the life of the loan.

Cannot Be Removed

Unlike PMI, annual MIP on FHA loans with less than 10% down cannot be removed without refinancing to a conventional loan.

PMI vs MIP: Key Differences

Conventional PMI

Can be removed when reaching 20% equity

No upfront premium required

Monthly cost: 0.5% - 2% annually

Automatic cancellation at 22% equity

FHA MIP

1.75% upfront premium

Monthly cost: 0.45% - 1.05% annually

Life of loan (if less than 10% down)

11 years removal (if 10%+ down)

Homebuyers standing in front of their new home in Greenville, South Carolina

Strategies to Avoid PMI

While PMI can be a useful tool to buy a home sooner, there are ways to avoid this extra cost.

Make a 20% Down Payment

This is the most straightforward way to avoid PMI on a conventional loan.

Use a Piggyback Loan

Take out a second mortgage (like an 80-10-10 loan) to cover part of the down payment and avoid PMI.

Choose a Government-Backed Loan

VA loans do not have PMI. USDA loans have a guarantee fee, but it's often lower than PMI.

Lender-Paid PMI (LPMI)

The lender covers the PMI cost in exchange for a slightly higher interest rate. This could be beneficial depending on your situation.

Questions About PMI or MIP?

I can help you analyze your options and find the best path forward to minimize your costs and achieve your homeownership goals.