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What Is PMI (Private Mortgage Insurance)?
PMI is insurance that protects your lender, not you, required on most conventional mortgages when your down payment is under 20%.
PMI typically costs 0.5% to 1.5% of your loan amount per year, split into monthly payments added to your mortgage bill. On a $400,000 loan, that can run $170 to $500 a month.
PMI cancels automatically once your loan balance drops to 78% of the home’s original value, and you can usually request cancellation earlier, once you reach 80%, if you ask in writing and meet payment history requirements.
PMI is not the same as homeowners insurance. It does not protect your home or belongings. It exists purely to protect the lender if you default, which is why it disappears once your equity makes default less risky for them.