Private mortgage insurance (PMI) is an insurance policy required on most conventional home loans when your down payment is less than 20%. In Houston, PMI protects the lender if the borrower defaults, but it also helps buyers enter the market sooner without having to save a massive upfront payment. PMI can be paid monthly, upfront, or through a combination of both, and it can be removed once you reach 20% equity in your home.
How PMI Works in Houston
When you buy a home with less than 20% down, your loan-to-value ratio (LTV) is above 80%. Lenders see this as higher risk, and PMI offsets that risk by covering part of the lender's loss if you default.
Example:
-
Home price: $350,000
-
Down payment: 10% ($35,000)
-
Loan amount: $315,000
With an LTV of 90%, PMI will be required until your balance drops to 80% of the home's value.
PMI Costs in Houston
PMI costs vary depending on your LTV, credit score, loan size, and loan type.
Typical Houston PMI cost range:
-
Annual rate: 0.14% to 2.24% of loan balance
-
Monthly example: $30-$70 per $100,000 borrowed
-
On a $315,000 loan: $95-$220 per month
Current Houston Conventional Mortgage Rate Snapshot
(Rates as of this week; subject to change based on credit profile and loan type)
| Loan Type | Interest Rate | APR | Monthly Payment (No PMI) | Monthly PMI (Estimate) | Total Monthly |
|---|---|---|---|---|---|
| 30-Year Fixed | 6.75% | 6.90% | $2,043 | $120 | $2,163 |
| 15-Year Fixed | 6.10% | 6.25% | $2,674 | $95 | $2,769 |
| 5/1 ARM | 6.35% | 6.50% | $1,964 | $110 | $2,074 |
(Based on a $315,000 loan amount, 10% down, 740+ credit score)
PMI Payment Options
You can choose how PMI is structured:
-
Monthly Premium - Most common; paid as part of your mortgage payment.
-
Upfront Premium - Paid in one lump sum at closing; no monthly PMI.
-
Split Premium - Partial upfront payment plus smaller monthly payments.
Canceling PMI in Houston
There are three main ways to remove PMI:
-
Request at 80% LTV: Once your loan balance reaches 80% of the original value.
-
Automatic removal at 78% LTV: Lender must cancel by law.
-
Early removal via appraisal: If your home has appreciated quickly, you can order an appraisal to prove 20% equity.
How Houston's Market Can Speed Up PMI Removal
In rapidly appreciating neighborhoods like The Heights, East Downtown, and Spring Branch, it's not uncommon for homes to gain 8-12% in value in just a few years. This means you could hit the 20% equity mark years ahead of schedule and remove PMI early.
Equity Payoff Timeline With and Without Extra Payments
Here's how making an extra $200 per month toward your principal can shorten your PMI timeline on a $315,000 loan at 6.75% interest:
| Year | Balance Without Extra Payments | Balance With $200 Extra/Month | LTV Without Extra | LTV With Extra |
|---|---|---|---|---|
| 1 | $308,022 | $305,268 | 88% | 87% |
| 3 | $295,011 | $287,652 | 84% | 82% |
| 5 | $280,994 | $268,914 | 80% | 77% ✅ |
Result: You could remove PMI one to two years sooner just by paying an extra $200 monthly.
PMI vs. FHA MIP and Lender-Paid PMI
-
PMI: For conventional loans; cancelable at 80% equity.
-
FHA MIP: For FHA loans; often lasts for the full loan term unless refinanced.
-
Lender-Paid PMI: PMI cost is built into a higher interest rate; can only be removed by refinancing.
Avoiding PMI Entirely
-
Make a 20% down payment.
-
Use VA or USDA loans (no PMI).
-
Use an 80-10-10 piggyback loan (80% first mortgage, 10% second mortgage, 10% down).
Why Choose Flagstone Mortgage for PMI-Smart Home Loans
-
Local market expertise: We understand Houston's unique appreciation patterns.
-
Custom PMI strategies: We compare payment methods for your goals.
-
Equity tracking service: Alerts you the moment you qualify for removal.
-
Access to alternatives: VA, USDA, piggyback, and creative financing solutions.
Houston PMI FAQ
Q: Does PMI protect me or the lender?
A: PMI protects the lender, not the borrower.
Q: How much does PMI cost in Houston?
A: Typically 0.14%-2.24% of the loan balance annually, or $95-$220 monthly on a $315,000 loan.
Q: How can I remove PMI early?
A: Build 20% equity through payments or appreciation, then request removal; or refinance if rates are favorable.
Q: Can PMI be avoided?
A: Yes—make a 20% down payment, use VA/USDA loans, or structure a piggyback mortgage.
Final Word
PMI is often a stepping stone to homeownership in Houston, giving buyers the ability to purchase sooner rather than later. With Flagstone Mortgage, you get a partner who understands the local market, tracks your equity, and guides you to the most cost-efficient path—helping you remove PMI as quickly as possible and keep more money in your pocket.