PMI

Banking & Credit

Private Mortgage Insurance (PMI) is insurance required by conventional mortgage lenders when your down payment is less than 20% of the home's purchase price. It protects the lender (not you) against default. Monthly PMI costs typically 0.3-1.5% of the loan amount annually, paid in monthly installments. A $400,000 mortgage with 5% down might cost $200-$400/month in PMI. PMI automatically terminates when your loan-to-value ratio reaches 78%; you can request removal at 80% LTV by getting an appraisal. FHA loans charge equivalent Mortgage Insurance Premium (MIP) but typically can't be removed without refinancing.