What is PMI (private mortgage insurance)?

PMI is insurance a lender requires when you put less than 20% down on a conventional mortgage. It protects the lender — not you — if you stop making payments. It typically costs $30–$70 per month per $100,000 borrowed and can be cancelled once you reach 20% equity.

What PMI is and who it protects

Private mortgage insurance is a policy arranged by your lender and provided by a private insurer. As the CFPB explains, PMI protects the lender — not you — against losses if you stop making payments. Despite protecting the lender, you pay the premiums. PMI is separate from homeowners insurance, which protects your property.

When PMI is required

PMI applies to conventional loans when your down payment is less than 20% of the purchase price, and may apply when refinancing with less than 20% equity. Government-backed loans have their own structures: FHA loans have a Mortgage Insurance Premium (MIP), not PMI; VA and USDA loans have separate guarantee fees.

What PMI costs

PMI cost depends on your credit score, loan amount, down payment, and rate type. Freddie Mac estimates PMI typically runs $30–$70 per month for every $100,000 borrowed. On a $300,000 loan, roughly $90–$210 per month. You may pay it monthly, as a one-time upfront premium, or a combination.

When you can cancel PMI — your legal rights

The federal Homeowners Protection Act gives you two rights: (1) Request cancellation when your balance is scheduled to reach 80% of the original value. (2) Automatic termination when the balance is scheduled to reach 78% of the original value, if you're current. The CFPB explains how to request cancellation.

How to avoid PMI

Save a 20% down payment — eliminates PMI on conventional loans.
Lender-paid PMI (LPMI) — the lender pays it upfront and charges a higher rate instead.
Piggyback loan (80/10/10) — a second loan keeps your first mortgage at or below 80% LTV.
VA or USDA loans — if eligible, these don't require PMI (though they have their own fees).

Sources

PMI is required on conventional loans with down payments below 20%; it protects the lender, not the borrower. — CFPB — What is PMI?
PMI typically costs $30–$70 per month for every $100,000 borrowed, varying by credit score, loan amount, and down payment. — Freddie Mac — Breaking Down PMI
Under the Homeowners Protection Act, borrowers can request PMI cancellation at 80% LTV and lenders must auto-terminate it at 78% LTV. — CFPB

Key takeaways

PMI protects the lender, not you — but you pay for it when your conventional down payment is under 20%.
Typical cost: $30–$70/month per $100,000 borrowed.
You can request cancellation at 80% LTV; lenders must auto-cancel at 78% LTV.
Avoid PMI with 20% down, lender-paid PMI, a piggyback loan, or a VA/USDA loan.