Finance
Private Mortgage Insurance (PMI)
Updated 2025-10-19
Definition
Insurance required by most lenders when a conventional mortgage borrower puts less than 20% down. PMI protects the lender, not the borrower, against default losses. Typical annual cost is 0.3% to 1.5% of the original loan amount, bundled into the monthly payment. The Homeowners Protection Act of 1998 requires automatic PMI cancellation when the loan reaches 78% of the original property value, though borrowers can request cancellation at 80%. FHA loans carry similar Mortgage Insurance Premium (MIP) payments that often last the life of the loan.
Primary source: CFPB PMI explainer
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