JagInsights › Glossary › PMI
What is private mortgage insurance?
PMI is insurance that protects the lender when you put down less than 20 percent on many conventional mortgages. It is not homeowners insurance.
Private mortgage insurance protects the lender, not you, when a conventional mortgage is made with a small down payment. You pay the premium. The lender is the one who is insured.
Worked example
A $300,000 home with 5 percent down is a $285,000 loan. Many conventional loans then add PMI until equity is thick enough. The monthly housing cost is principal, interest, taxes, insurance, and this extra line. Canceling PMI later is a process with the servicer, not an automatic gift.
Why it matters
People hear insurance and think their furniture is covered. PMI does not replace homeowners insurance, and it does not pay your mortgage if you lose a job.
Questions people ask
Is PMI required on every mortgage?
No. Many conventional loans ask for it under 20 percent down. FHA loans use a different insurance. VA and USDA loans have their own rules.
When does PMI drop off?
On many conventional loans, you can request removal around 20 percent equity, and it must drop at a later statutory point. Ask the servicer. Do not assume the month.
Can I avoid PMI with a piggyback loan?
Some people use a second loan instead. That is still debt. It is a trade, not a loophole this page can bless.
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