MORTGAGE GLOSSARY
What Is PMI (Private Mortgage Insurance)?
The short definition
Private mortgage insurance (PMI) protects the lender — not you — if you stop making payments. It's typically required on conventional loans when the down payment is below 20%.
How much it costs
PMI is usually a small percentage of your loan balance per year, added to your monthly payment. The exact cost depends on your down payment size and credit score.
It's not necessarily permanent
Once you've built enough equity — typically reaching 20% equity in the home — you can usually request that PMI be removed, and it's often automatically dropped once you reach 22% equity by law.
Why it matters
PMI is one reason a 20% down payment can lower your monthly costs beyond just the smaller loan amount. See the down payment calculator for what different down payment sizes actually cost.
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