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What is PMI?

Private Mortgage Insurance (PMI) is required by most lenders when your down payment is less than 20% of the home's purchase price. It protects the lender — not you — in case you default on the loan.

PMI typically costs between 0.5% and 1.5% of the original loan amount per year, divided into monthly payments. For a $250,000 loan at 1%, that's about $208/month.

How to Remove PMI

Under the Homeowners Protection Act, you can request PMI cancellation when your loan balance reaches 80% of the original home value. Lenders must automatically cancel it when it reaches 78%. You can also remove PMI sooner if your home appreciates significantly — request a new appraisal to demonstrate the 20% equity threshold.