Mortgage glossary
Private mortgage insurance (PMI)
Definition: Private mortgage insurance (PMI) is insurance that protects the lender on a conventional loan when the borrower puts down less than 20%, usually paid as a monthly addition to the mortgage payment.
The cost of PMI depends mainly on the loan-to-value ratio and credit score. It can be paid monthly, as a single upfront premium, or through lender paid options that are built into a higher rate.
Unlike FHA mortgage insurance, PMI is not permanent. Under federal law, borrowers can generally request cancellation when the balance reaches 80% of the original value, and it typically ends automatically at 78% if payments are current. Rising home values or extra principal payments can sometimes support earlier removal with a new appraisal, subject to servicer rules.
Related terms
Reviewed by Kyle Richardson, NMLS #863464. General information, not advice for your specific situation. All glossary terms
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