Private Mortgage Insurance (PMI) — Financial Glossary

Definition: Insurance required when your down payment is less than 20%, protecting the lender if you default.

What is PMI?

Private Mortgage Insurance (PMI) is a type of insurance that protects the lender (not you) if you stop making payments on your mortgage. It is typically required when your down payment is less than 20% of the home's purchase price.

How much does it cost?

PMI usually costs between 0.5% and 1% of the entire loan amount per year. On a $240,000 loan, that's $1,200 to $2,400 per year, or $100 to $200 per month added to your payment.

How to remove PMI

You can request PMI removal once your loan balance reaches 80% of the original home value. It is automatically cancelled when the balance reaches 78%.