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Private mortgage insurance (PMI)
Insurance that protects the lender, not you, when your down payment is small. You pay it monthly, and US federal law sets when it ends.
On a conventional US loan, a lender usually asks for PMI when you borrow most of the home’s value. The premium is added to the monthly payment along with principal, interest, property tax and home insurance.
PMI does not last for the whole loan. It ends on its own once the balance has fallen far enough against the home’s original value, or halfway through the term, whichever comes first. You can also ask to cancel it earlier. The US mortgage calculator shows the month PMI ends, and the legal sources page lists the law behind each threshold.
Related terms
- Escrow
An account your loan servicer holds to pay your property tax and home insurance for you. Each monthly payment adds to it.
- Loan-to-value (LTV) / down payment
Loan-to-value is the loan amount divided by the value of the home. The down payment is the rest of the price, paid with your own money.
- Loan term
The time you have to repay the loan in full, counted in months or years.