What is private mortgage insurance (PMI)?

Private mortgage insurance, or PMI, is a mortgage insurance policy that protects your lender in the unlikely event your home goes into foreclosure.

When do I need PMI?

PMI is based on your loan amount and is automatically included in your monthly mortgage payment if you contribute less than 20% toward a down payment. That being said, you’re required to pay PMI until you’ve invested 20% equity in your home or reached 80% loan-to-value (LTV).

For instance, if you purchase a home for $200,000 and you make a down payment of 10%, or $20,000. That means you need a mortgage loan of $180,000 from the Credit Union. It also means your LTV is 90% ($200,000 / $180,000). Once you have enough invested that your LTV hits 80%, the PMI can be removed.

What is the cost of PMI?

Typically, PMI costs about 0.5% to 1% of your loan amount and remains the same throughout the life of the loan if it’s a Federal Housing Administration (FHA) loan, or until you’ve reached 22% equity in a conventional mortgage.

The percentage is based on your LTV, debt-to-income ratio (DTI), and your FICO score.

This means, on a $200,000 loan you could be paying an extra $1,000 to $2,000 per year until you’ve reached 20% equity. Or, an additional $83.33 to $166.67 per month on top of interest, principal, and escrow.

How will I know when to stop paying PMI?

Once you’ve reached 78% LTV you’ll receive a notification in the mail that you no longer need to pay PMI and it will automatically be removed from your monthly payment.

You also have the option to remove it once you’ve reached 80% LTV. However, in order to do so you will need to:

1. Contact us and pay for an appraisal
2. Refinance if you currently have an FHA

Where do I purchase PMI?

Whomever you’re financing your mortgage through should provide recommendations or they will procure a mortgage insurance certificate themselves.

DuPage Credit Union takes care of the mortgage insurance certificate in-house.

Is PMI tax deductible?

Over the past few years there’s been a bit of back and forth as to whether or not tax deductions for PMI are allowed. On January 8^th, 2019, California Representative Julia Brownley made the Mortgage Insurance Tax Deduction Act of 2019 a permanent part of the tax code.

This means that PMI is still tax deductible in 2019, but there are a few requirements.

• Loans must have been purchased in 2007 or later
• PMI can only be deducted for the primary or secondary home
• Only gross income of $109,000 or less are eligible for deductible premiums

PMI for FHA loans vs Low Down Payment Mortgage

If you’re in the market for a mortgage, but don’t have 20% to put down, an FHA loan may seem like the best option. It only requires 3.5% down and is the preferred mortgage loan for those with lower incomes or credit scores. On the flip side, you’ll have to provide upfront mortgage insurance premiums (MIP), as well as pay PMI for the life of the loan or until you refinance. Whereas, with a DuPage Credit Union Low Down Payment Mortgage, there’s no MIP, you’re only required to pay PMI until you’ve reached 80% LTV, and down payments are as low as 3%.

Not sure which option is the best one for you? Give us a call at 800-323-2611 or schedule an appointment with one of our experts—we’ll be happy to help!

Private Mortgage Insurance (PMI) may be required for mortgage loans that have a loan-to-value (LTV) greater than 80%. PMI increases the monthly payment obligation of the applicable mortgage and is not a substitute for homeowner insurance. PMI will drop automatically at 78% LTV for qualifying mortgages but may be requested in writing once your loan hits 80% LTV from the original value.

^*Homeowners insurance required. Single-Family homes only in Illinois. Does not include 2-4 flat or apartment complex financing. Available on 15 and 30-year mortgages. Down payments as low as 3.5% with loans up to $806,500 or the county limit (whichever is less). Consult a tax adviser regarding deductibility of interest. Other restrictions may apply.

^**Rates shown are base rates accurate as of 12/15/2025 7:30am CST based on a mortgage in DuPage County, IL. Rates subject to change at any time and your rate may be higher or lower based on underwriting factors. Must have a Credit Union membership established and be in good standing. Rate, points, and Annual Percentage Rate (‘APR’) may be adjusted based on several factors including, but not limited to, state of property location, loan amount, documentation type, loan type, occupancy type, property type, loan-to-value, and your credit score. Your final rate and points may be higher or lower than those quoted based on information relating to these factors, which may be determined after you apply. Maximum loan-to-value varies based on multiple factors, including but not limited to, loan type, property type, and occupancy type. Payment Examples: 30-year fixed-rate mortgage at 6.125% for a $225,000.00 first mortgage loan with an 80% LTV and credit score of 780 or higher would have a monthly principal and interest payment of $1,367.12; 20-year fixed-rate mortgage at 5.875% for a $225,000.00 first mortgage loan with an 80% LTV and credit score of 780 or higher would have a monthly principal and interest payment of $1,595.79; 15-year fixed-rate mortgage at 5.500% for a $225,000.00 first mortgage loan with an 80% LTV and credit score of 780 or higher would have a monthly principal and interest payment of $1,838.44; 10-year fixed-rate mortgage at 5.375% for a $225,000.00 first mortgage loan with an 80% LTV and credit score of 780 or higher would have a monthly principal and interest payment of $2,427.93. The payment examples and all other information on this page are provided for comparative purposes only. The payment examples do not include mortgage insurance, homeowners’ insurance, property taxes, or homeowner association dues. Your actual payment obligation will be greater considering taxes and insurance premiums. Homeowners’ insurance is required.

See current rates and payment examples.