What Is PMI and When Do You Pay It?
Private mortgage insurance, commonly called PMI, is an insurance product that may be required on some conventional mortgages when the borrower makes a smaller down payment. It protects the lender against certain losses; it does not protect the homeowner from missing payments. Why PMI changes the budget PMI is an additional housing cost. It is separate from principal, interest, property taxes, homeowners insurance, and HOA dues. If it applies to your loan, leaving it out of an affordability estimate can make a home appear less expensive than it really is. The amount and cancellation rules depend on the loan, lender, insurer, property, and borrower’s circumstances. Do not assume that every mortgage uses the same calculation. Is PMI required with every loan? No. Loan programs use different mortgage-insurance structures and eligibility rules. The Consumer Financial Protection Bureau’s PMI explanation describes common conventional-loan situations, including the relationship between a 20% d...