PMI (Private Mortgage Insurance)

PMI (Private Mortgage Insurance) is a type of insurance policy that protects the lender, not the borrower, if the borrower stops making mortgage payments.

Homeowners typically encounter PMI when they purchase a home with a conventional loan and put down less than 20% of the purchase price. The cost is usually added to the monthly mortgage payment, though it can sometimes be structured as an upfront premium or a combination of both. PMI rates vary based on factors such as loan size, credit score, and down payment amount, but they commonly fall somewhere in the range of 0.5% to 2% of the original loan amount per year, though your specific situation may differ. Because PMI is an added monthly expense, it meaningfully affects the true cost of homeownership, which is why tracking it matters.

Watch for: Once your home equity reaches 20%, you may be able to request cancellation of PMI. Under the federal Homeowners Protection Act, lenders are generally required to cancel PMI automatically when your loan balance reaches 78% of the original purchase price, assuming payments are current. Keep an eye on your loan statements and ask your lender about the specific cancellation terms on your loan, as rules can vary.

Note: HomeRule provides general cost information only and is not a lender, financial advisor, or real estate professional. Always consult your lender or a qualified advisor for guidance specific to your loan.