Credit score impacts PMI up to 7x more than the down payment
PMI rates are estimates from published MGIC and Radian cards; your lender's card may differ. Today’s rates →
Altgage Inc. NMLS #2447252 | 100 Cambridge St, Floor 14, Boston, MA 02114Private Mortgage Insurance (PMI) is what conventional lenders charge when you put less than 20% down. It protects the lender if you default — you pay it, but only the lender benefits. The good news: PMI isn't permanent. It drops automatically once your loan-to-value ratio reaches 78%, and you can request removal at 80%.
Two factors set your PMI rate: credit score and down payment. They are not equal. Credit dominates. Moving from a 680 to a 780+ score can cut your monthly PMI in half or more. Down payment helps too, but most increments inside the 3–20% range barely move the needle — with one exception (see next).
There's a real drop between 3% down and 5% down — going from 3% to 5% can lower your monthly PMI by roughly 40%. Lenders price the 3–5% LTV band more aggressively than the bands above it. If you're close to 5%, scraping together the extra 2% almost always pays for itself. Above 5%, the per-percent improvement flattens until you reach 10%.
Pay down to 80% LTV and request cancellation in writing. Wait for amortization to hit 78% LTV — the lender drops it automatically. Or refinance once home appreciation puts you past 20% equity. If your credit has improved meaningfully since closing, refinancing at a similar rate just to kill PMI is often worth doing.
If your score is below 680 and you're putting less than 5% down, FHA's mortgage insurance (MIP) is often cheaper than conventional PMI — sometimes by a wide margin. The calculator flags this automatically when it applies. The trade-off: FHA MIP doesn't drop off the way conventional PMI does; it usually requires a refinance to remove.
Federal law sets the floor here, and knowing it stops a servicer from stalling. Under the Homeowners Protection Act, on a loan you’re current on, PMI must be cancelled automatically once your balance reaches 78% of the original value, based on the original amortization schedule — regardless of what the home is worth now. You can request cancellation in writing at 80% on that same schedule. And if neither has happened by the midpoint of the loan term, it terminates then.
Those thresholds run off the original value, which is why appreciation doesn’t help you automatically. To use a higher current value, you’re asking the servicer to accept a new appraisal, which they do at their discretion and usually at your cost — typically several hundred dollars. Worth it when the market has moved substantially and you’re years from the scheduled date.
Two things get people stuck. Requests must be in writing, and payment history matters — a recent late payment can suspend your right to request cancellation until the record is clean again.
Four routes, in rough order of how often they actually work.
Put 20% down. The obvious one, and often the wrong one — twenty percent locked into equity is twenty percent you can’t reach, and PMI on a strong credit profile is cheaper than most people assume. Price both before defaulting to it.
A piggyback second. An 80/10/10 structure — 80% first mortgage, 10% second, 10% down — avoids PMI by keeping the first lien at 80%. The second carries a higher rate, so this wins or loses on the spread between that rate and the PMI premium you’d otherwise pay.
Lender-paid PMI. The lender covers the premium in exchange for a higher rate, usually a quarter to a half point. There’s no monthly PMI line, but there’s also nothing to cancel at 80% — the rate is permanent for the life of the loan. Reasonable if you’ll refinance or move within several years, expensive if you hold the loan to term.
A VA loan, if you’re eligible. No mortgage insurance at any down payment, funding fee instead. If you qualify, this generally beats every other option here.
PMI typically runs between roughly 0.2% and 1.5% of the loan amount per year, and credit score moves it far more than down payment does within the 3–20% range. On a $400,000 loan, that spread is the difference between about $67 and about $500 a month for the same house.
Automatically at 78% loan-to-value on the original amortization schedule, provided you’re current on payments, and on request in writing at 80%. Both use your home’s original value, not its current one — to use appreciation you have to ask the servicer to accept a new appraisal, which they aren’t obliged to do.
The rate comes from a grid the insurer maintains, cross-referencing your credit score against your loan-to-value ratio, then applied to the loan amount and divided across twelve months. Credit score is the dominant variable: the same 95% LTV loan can price at very different rates for a 680 borrower and a 780 one.
Reach 80% loan-to-value and request cancellation in writing, or wait for automatic termination at 78%. You can accelerate either by paying down principal, or by paying for a new appraisal if the home has appreciated enough that the servicer will use current value instead of original value.
Put 20% down, use a piggyback second mortgage to keep the first lien at 80%, take lender-paid PMI in exchange for a higher rate, or use a VA loan if you’re eligible. Each trades one cost for another — the right answer depends on your credit score and how long you’ll hold the loan.
Usually not without refinancing. FHA mortgage insurance works differently from conventional PMI — on most FHA loans with a low down payment it stays for the life of the loan, so borrowers who want it gone typically refinance into a conventional loan once they have 20% equity and the credit profile to make it worthwhile.
Not automatically. The automatic and request-based thresholds both run off the home’s original value, so appreciation only helps if the servicer agrees to use a new appraisal. That’s a discretionary decision on their side and you generally pay for the appraisal.