Mortgage & Home Loans

What is PMI?

PMI is insurance that protects the lender when you put down less than 20% on a conventional loan. It does not protect you—it covers the lender if you default. The cost is usually added to your monthly payment.

Under the Homeowners Protection Act, you have the right to request PMI cancellation in writing when your balance hits 80% of the home's original value, as long as you're current on payments.

Lenders must automatically cancel PMI when your balance reaches 78% of the original value. If the loan is still active, PMI must terminate at the midpoint of the amortization schedule—like year 15 on a 30-year loan.

Quick Facts

Down Payment TriggerRequired for down payments under 20%

HPA Cancellation PointBorrower request at 80% LTV of original value

HPA Automatic TerminationRequired at 78% LTV of original value

Alternative TerminationAmortization midpoint (e.g. year 15 of 30-year loan)

PRACTICAL EXAMPLE

You buy a $300,000 home with 10% down ($30,000) and borrow $270,000. You'll pay about $150 a month in PMI until your balance drops to $240,000 — that's 80% of the original value, which could take years.

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RELATED TERMS

Learn More Key Concepts

MortgageA loan secured by real estate that you pay back in regular installments over a set term.

Down PaymentThe cash you pay upfront when buying a home, which becomes your initial equity in the property.

Conventional LoanA mortgage loan that is not backed or insured by a government agency, typically conforming to Fannie Mae or Freddie Mac standards.

LTV RatioA lending risk assessment ratio calculated by dividing the outstanding loan balance by the property's appraised value.

EscrowA neutral holding account managed by a mortgage servicer to collect property taxes and homeowners insurance for annual payment.

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