What is Private Mortgage Insurance?

Private mortgage insurance, or PMI, is insurance that may be required when you take out a conventional mortgage with a down payment of less than 20%. PMI protects the lender if you’re unable to make your mortgage payments, but it can also help make homeownership possible without waiting until you’ve saved a 20% down payment.

How Much Does PMI Cost?

The cost of PMI varies based on your loan and financial situation. Factors that can affect your premium include:

• Down payment amount
• Credit score
• Loan amount and home value
• Property type
• Debt-to-income ratio

Your lender can provide an estimate of your PMI costs as you compare mortgage options.

How Do You Pay PMI?

PMI is commonly included as part of your monthly mortgage payment. Depending on your loan and lender, other payment options may also be available, such as paying some or all of the premium upfront.

Your Loan Estimate and Closing Disclosure will provide more information about whether mortgage insurance is required and what it will cost.

Can You Avoid PMI?

Making a down payment of at least 20% on a conventional mortgage is one way to avoid PMI. However, waiting to save a larger down payment isn't necessarily the right choice for every buyer.

Other loan programs and financing options may have different down payment and mortgage insurance requirements. A mortgage lender can help you compare your options based on your budget, credit and homebuying goals.

When Can PMI Be Removed?

PMI doesn't necessarily last for the life of your mortgage. For many conventional loans, you may be able to request cancellation once your loan balance reaches 80% of the home's original value, subject to certain requirements. PMI generally must automatically terminate when the balance is scheduled to reach 78% of the home's original value, provided the loan is current and other requirements are met.