Private mortgage insurance (PMI) is a monthly fee lenders charge when your down payment on a conventional loan is under 20%. Here's the twist: you pay for it, but it protects the lender — if you default, PMI reimburses them, not you.
It exists so buyers don't have to spend a decade saving a full 20% down. In exchange, your monthly payment carries an extra line item until you've built enough equity. PMI typically ends in one of two ways:
- You can request cancellation once you reach 20% equity in the home.
- Lenders must cancel it automatically once the balance amortizes down to 78% of the original value.
Rising home values plus steady principal payments can get you there faster than you'd expect. FHA loans have their own version (MIP) with stickier removal rules — one reason buyers compare FHA vs conventional carefully. For costs and removal strategies, see PMI explained, and check how a bigger down payment changes the math.