How much is PMI on a $300,000 home in Illinois?

On a $285,000 loan (5% down on a $300,000 home), PMI typically costs between $100 and $200 per month depending on your credit score and the insurer. At a 0.8% annual rate, that's approximately $190/month. Higher credit scores and larger down payments reduce this cost.

Can I remove PMI early in Illinois if my home value increases?

Yes. If your home has appreciated significantly, you can request a new appraisal. If the appraisal shows your current loan balance is 80% or less of the new appraised value, you can request PMI cancellation. Your lender will typically require a good payment history and may charge for the appraisal.

Is PMI tax deductible in Illinois?

Federal PMI deductibility has varied over the years — consult a tax professional for the current year's rules as Congress periodically extends or allows this deduction to expire. Illinois does not offer a separate state-level PMI deduction.

Do VA loans require PMI in Illinois?

No. VA loans do not require private mortgage insurance or any form of ongoing mortgage insurance, regardless of the down payment amount. This is one of the most valuable benefits of VA loan eligibility. VA loans do have a one-time funding fee, but no monthly mortgage insurance premium.

Private Mortgage Insurance (PMI) in Illinois: What Every Buyer Needs to Know

Private mortgage insurance — PMI — is one of those costs that catches first-time buyers off guard. You’re already stretching to afford a down payment and closing costs, and then your lender tells you there’s an additional monthly charge on top of your mortgage payment. Here’s what PMI is, why it exists, how much it costs, and most importantly — how to get rid of it.

What Is PMI?

Private mortgage insurance is insurance that protects the lender (not you) if you default on your loan. It’s required on conventional loans when your down payment is less than 20% of the home’s purchase price. From the lender’s perspective, a borrower with less equity in the home poses higher risk — PMI compensates for that risk.

Despite being for the lender’s benefit, the borrower pays for it. This is a frustrating reality of low-down-payment financing, but understanding the rules lets you minimize the cost and eliminate it as soon as possible.

When Is PMI Required in Illinois?

On a conventional loan, PMI is required when your loan-to-value ratio (LTV) exceeds 80% — meaning your down payment is less than 20%. For example:

Home price: $300,000
Down payment: $15,000 (5%)
Loan amount: $285,000
LTV: 95% — PMI required

PMI is not required on FHA loans — those have their own mortgage insurance premiums (MIP) with different rules. VA loans have no mortgage insurance at all, which is one of the VA loan program’s most significant benefits for eligible veterans and service members.

How Much Does PMI Cost in Illinois?

PMI costs typically range from 0.5% to 1.5% of the loan amount annually, paid monthly. The exact rate depends on your credit score, LTV, loan term, and the insurer. For a $285,000 loan at a 0.8% PMI rate, that’s approximately $190/month — a meaningful addition to your housing costs.

Higher credit scores and larger down payments (even still below 20%) result in lower PMI rates. A borrower putting 10% down with a 760 credit score will pay substantially less PMI than someone putting 3% down with a 680 score.

Types of PMI

PMI isn’t always a simple monthly add-on. There are several structures:

Monthly PMI: The most common type. Added to your monthly payment and cancellable once you reach 20% equity.
Single-premium PMI: A lump sum paid at closing (or rolled into the loan). Higher upfront cost, no monthly charge. Can make sense if you have cash but want to keep monthly payments low.
Lender-paid PMI (LPMI): The lender pays the PMI premium in exchange for a higher interest rate. Your monthly payment may be lower, but the higher rate is permanent — you can’t cancel it the way you cancel monthly PMI.
Split-premium PMI: A combination of upfront and monthly premiums.

Monthly PMI is the most flexible for most Illinois buyers because it’s cancellable. Lender-paid PMI locks you into a higher rate permanently, which can cost more over time despite the lower monthly appearance.

How to Cancel PMI in Illinois

The federal Homeowners Protection Act (HPA) governs PMI cancellation on conventional loans. There are two key thresholds:

At 80% LTV (borrower-requested cancellation): Once your loan balance drops to 80% of the original appraised value, you can formally request PMI cancellation in writing. Your lender must honor this request if you have a good payment history and the property value hasn’t declined. You may need a new appraisal to confirm value.
At 78% LTV (automatic termination): When your loan balance reaches 78% of the original purchase price based on your scheduled amortization, your lender is required by law to automatically cancel PMI — no request needed. Note this is based on the original purchase price, not current market value.

Many Illinois homeowners reach the 80% LTV threshold faster than expected because of strong appreciation in the south and southwest suburbs. If your home has gained significant value since purchase, a new appraisal may qualify you for early PMI removal even if you haven’t paid down 20% through payments alone.

Strategies to Avoid or Minimize PMI

If PMI is a sticking point in your planning, several strategies can help:

Save to 20%: The simplest solution — but not always realistic given Illinois home prices and timing considerations.
Piggyback loan (80-10-10): Take a first mortgage for 80%, a second mortgage (HELOC or fixed second) for 10%, and put 10% down. No PMI on the first mortgage, though the second mortgage carries its own rate.
Illinois down payment assistance: IHDA programs can supplement your down payment, potentially helping you clear the 20% threshold or reducing PMI exposure. See our Illinois Down Payment Assistance Guide.
Choose a higher rate with LPMI: As noted above, this eliminates monthly PMI but embeds the cost permanently in your rate. Run the math carefully for your specific loan.

FHA vs. Conventional PMI: The Key Difference

FHA loans use their own mortgage insurance — called MIP (Mortgage Insurance Premium) — rather than PMI. The critical distinction: FHA MIP behaves differently from conventional PMI:

FHA loans originated after June 2013 with less than 10% down carry MIP for the entire loan life — it never cancels based on equity alone
FHA MIP includes both an upfront premium (1.75% of the loan, usually rolled in) and an annual premium paid monthly
To eliminate FHA MIP, most borrowers must refinance into a conventional loan once they reach 20% equity

For many Illinois buyers, this makes conventional loans with PMI more advantageous long-term than FHA financing, particularly if the borrower expects to build equity through appreciation or extra payments. Your lender can model both scenarios for your specific situation.