Mortgage Insurance (PMI)
Private Mortgage Insurance (PMI) is an insurance policy required on most conventional loans when the borrower puts less than 20% down. It protects the lender — not the borrower — in case of default.
PMI can be paid monthly, upfront at closing, or as a combination of both. The cost varies based on credit score, LTV, and loan amount. On conventional loans, PMI can be removed once the borrower reaches 20% equity.
PMI is not the same as FHA mortgage insurance (MIP), which works differently and is typically required for the life of the loan. VA loans do not require any mortgage insurance — they use a one-time funding fee instead.
Why This Matters: PMI adds to your monthly cost, but it also makes homeownership possible with a smaller down payment. Understanding when it applies, how much it costs, and when it can be removed helps you plan your long-term strategy.
Common question
When do I need PMI?
PMI is typically required on conventional loans when you put less than 20% down. It protects the lender, not you, and can often be removed once you reach 20% equity.
How do I get rid of PMI?
On conventional loans, you can request removal once you reach 20% equity (by paying down the loan or appreciation). Some loans require a formal appraisal or minimum payment history — ask your servicer.
Related Topics
Related Mortgage Terms
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