PMI (private mortgage insurance)
Insurance the borrower pays that protects the lender when a conventional mortgage is taken out with less than 20% down.
PMI — private mortgage insurance — is insurance a borrower pays on a conventional mortgage when the down payment is less than 20% of the home price. It protects the lender, not the borrower, against loss if the loan defaults. The monthly cost typically runs a few tenths of a percent of the loan balance per year, added to the mortgage payment.
PMI ends when the loan's balance falls to a set share of the original home value — usually 80%, at which point the borrower can request removal, and 78%, at which point the servicer must cancel automatically, if payments are current. The timing depends on the amortization schedule and any extra principal payments made along the way.
Government-backed loans use different structures. FHA loans, for example, carry a mortgage insurance premium that follows separate rules and, in many cases, does not fall away with equity in the same manner as PMI.
Plumb is financial education, not financial, investment, tax, or legal advice.