NYC Affordability

What PMI actually is

Private mortgage insurance protects the lender, not the buyer, against default on a conventional loan. It doesn’t reduce your loan balance, pay down principal, or benefit you directly in any way — it exists purely because a lender is taking on more risk when a borrower has less than 20% equity in the property at closing, and PMI is the mechanism that offsets that risk without requiring a bigger down payment upfront. It’s specific to conventional loans; FHA and other government-backed loan types use a differently structured mortgage insurance premium that doesn’t cancel the same way.

When it applies

Any conventional loan with a down payment under 20% (loan-to-value, or LTV, above 80%) requires PMI. This applies the same way to a NYC condo as anywhere else — co-ops don’t carry PMI in the same form since co-op share loans are underwritten differently, though a lender may still price risk into the interest rate itself. Jumbo loans, which cover most financed condo purchases above roughly $1.2M in NYC’s high-cost lending area, usually require 20%+ down as a condition of the loan and typically don’t carry conventional PMI at all — so PMI mostly matters for conforming-size loans below that threshold.

The rate tiers

PMI is priced as an annual percentage of the loan balance, split into monthly payments, and the rate step-changes as your down payment crosses each 5-point threshold. For a borrower with good credit (roughly 720-740 FICO), typical published rate cards put PMI at:

Down payment	Annual PMI rate
15%-20% (LTV 80%-85%)	~0.52%
10%-15% (LTV 85%-90%)	~0.70%
5%-10% (LTV 90%-95%)	~0.95%
Under 5% (LTV 95%+)	~1.20%
20% or more	0% (not required)

These are the tiers this site’s calculators use internally. Actual PMI quotes vary by lender, credit score, loan type, and the mortgage insurer’s own pricing — CFPB’s general guidance puts the broader market range at roughly 0.2% to 1.5% annually, consistent with the tiers above. Always get an actual PMI quote from your lender rather than relying on published averages alone.

Worked example

Take a $900,000 condo purchase with 10% down:

• Down payment: $900,000 × 10% = $90,000
• Loan amount: $810,000
• PMI tier: 10%-15% down → 0.70% annual rate
• Annual PMI: $810,000 × 0.70% = $5,670
• Monthly PMI: $472.50

That $472.50 gets added directly to the monthly housing payment used in your lender’s debt-to-income calculation — it’s not a separate, ignorable line item. On the same purchase with 20% down instead of 10%, PMI disappears entirely, which is one of several reasons a bigger down payment can qualify a buyer for a larger loan than the interest-rate math alone would suggest, by freeing up DTI headroom PMI would otherwise consume.

How PMI gets cancelled

Under the federal Homeowners Protection Act, PMI doesn’t last for the life of the loan:

• Automatic cancellation: your servicer is required to cancel PMI automatically once your loan balance reaches 78% of the original purchase price — as long as you’re current on payments. No request needed.
• Borrower-requested cancellation: you can request cancellation once your balance reaches 80% of the original purchase price, in writing, once you meet the lender’s payment-history requirements.
• Getting there faster: extra principal payments, or a documented rise in the unit’s value (via a new appraisal, in some cases), can get you to 20% equity faster than scheduled amortization alone — worth asking your servicer about once you’re close.

Confirm your specific lender’s PMI cancellation process directly — the federal floor above is a minimum, and some servicers have slightly different documentation requirements.

PMI vs. a bigger down payment

PMI isn’t a cost to avoid at all costs — it’s often the more efficient path to buying sooner rather than saving for years to reach 20% down, especially in a market like NYC where prices can rise faster than a buyer can save the gap. The real comparison isn’t “PMI is bad,” it’s “does the monthly PMI cost outweigh the opportunity cost of holding cash you’d otherwise put toward a bigger down payment, closing costs, or a co-op’s reserve requirement instead.” Run both scenarios through the condo calculator before deciding — it’s often a closer call than it first appears once mortgage recording tax and the mansion tax cliff are factored in on the other side. See our closing costs guide for how PMI fits into the full cost picture beyond the down payment itself.