What Is PMI (Private Mortgage Insurance)?
Insurance lenders require on conventional loans when your down payment is below 20%.
Definition
PMI protects the lender, not you, if you default on your mortgage. It is required on conventional loans when LTV exceeds 80% (i.e., down payment under 20%). Costs typically run 0.3% to 1.5% of the loan annually, paid monthly with your mortgage. PMI automatically drops off when LTV reaches 78%, or you can request removal at 80% LTV with proof of value. PMI is different from MIP (FHA mortgage insurance), which has different rules and is harder to remove.
Example
A $300,000 loan at 0.6% PMI costs $150/month. Reaches 78% LTV in year 8 of a 30-year loan; PMI cancels automatically.
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Try the Mortgage CalculatorRelated Terms
LTV (Loan-to-Value Ratio)The loan amount divided by the property's appraised value, expressed as a percentage.Down PaymentThe cash you pay upfront when buying a home, separate from the mortgage loan amount.FHA LoanA government-insured mortgage with low down payment (3.5%) and easier credit requirements.