What Is PMI?
A simple explanation of private mortgage insurance and why some borrowers need it.
Overview
PMI (Private Mortgage Insurance) is insurance that protects the lender if a borrower defaults. It’s required on most conventional loans when the down payment is under 20%. This guide explains what PMI is, how it works, how much it costs, and how you can remove it.
What PMI Is
- Insurance that protects the lender
- Required when down payment is under 20%
- Applies to most conventional loans
- Not the same as homeowners insurance
When PMI Is Required
- Down payment under 20%
- Loan-to-value (LTV) above 80%
- Conventional loans only
- Not required on VA loans
How PMI Is Paid
- Monthly premium added to your mortgage payment
- Sometimes paid upfront at closing
- Some loans offer lender-paid PMI (higher rate instead)
How Much PMI Costs
- Typically 0.3% to 1.5% of the loan amount per year
- Based on credit score, LTV, and loan type
- Higher credit = lower PMI
- Lower down payment = higher PMI
How to Remove PMI
- Automatically removed at 78% LTV
- You can request removal at 80% LTV
- Faster removal if your home value increases
- Refinance can eliminate PMI if LTV is low enough
Why PMI Exists
- Allows buyers to purchase with less than 20% down
- Reduces lender risk
- Expands access to homeownership
Next Steps
- Check your current loan-to-value
- Review your PMI cost
- Estimate when you can remove PMI
- Explore refinance options if your value increased
Get a personalized mortgage review to see how soon you can remove PMI.
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