Private Mortgage Insurance (PMI)

Private Mortgage Insurance (PMI) is a policy lenders require when a borrower puts down less than 20% of a home's purchase price. It protects the lender in case the borrower defaults on the loan. PMI increases the monthly mortgage payment but allows individuals to buy a home with a smaller down payment. Once the homeowner has built enough equity—typically when they own 20% of the home—PMI can often be removed, reducing monthly costs. It's a way to make homeownership more accessible while managing the lender's risk.