Definition
PMI (Private Mortgage Insurance) protects lenders if you default on a conventional loan with less than 20% down. You pay it monthly (0.5-1.5% annually of loan), and it's removed when your balance reaches 78% of original value. You can request removal at 80% LTV.
Where you’ll meet it
Am I ready? Money, credit, and what it really costs
See it in Buying my first home · Step 1About this term
PMI is typically 0.5% to 1.5% annually of the loan amount, added to the monthly payment. Once the loan balance reaches 78% of the original home value (through payments and appreciation), PMI can be removed. Borrowers can request removal at 80% LTV with sufficient equity.
Pro Tip
Calculate if paying PMI while building equity faster is better than saving for 20% down; often it's advantageous to buy sooner with PMI.
Example
On a $300,000 loan with 10% down ($30,000), PMI might be $200-300 monthly until the balance drops to $240,000.