Private mortgage insurance, often called PMI, may be required on certain conventional loans when the borrower makes a smaller down payment. PMI protects the lender if the borrower defaults, but it is paid by the borrower.
When PMI may be required
PMI is commonly required when a borrower uses a conventional mortgage and puts less than 20% down. Requirements can vary based on loan program, lender guidelines, credit profile, and other factors.
How PMI affects payment
PMI may be added to your monthly mortgage payment, paid upfront, or structured in another way depending on the loan. Monthly PMI increases the total housing payment, which can affect affordability.
Want to estimate your monthly payment with taxes, insurance, and PMI?
PMI vs. homeowners insurance
- PMI protects the lender
- Homeowners insurance protects the property and borrower's coverage interests
- PMI is tied to loan risk
- Homeowners insurance is tied to property protection
- Both may appear in housing cost calculations
Can PMI be removed?
In some cases, PMI may be removed once the borrower reaches a certain equity level and meets applicable requirements. The process depends on loan type, payment history, property value, and servicer rules.
How to reduce PMI impact
- Make a larger down payment, if possible
- Compare loan options
- Improve credit profile before applying
- Understand how property value affects LTV
- Ask about monthly vs. upfront mortgage insurance structures