Private Mortgage Insurance (PMI)
An insurance policy that protects the lender if a borrower defaults on a conventional loan with less than 20% down.
Conventional loans above 80% LTV require PMI. The premium is determined by credit score, LTV, and loan term, and is typically rolled into the monthly payment as a separate line. Stronger credit dramatically lowers PMI cost, sometimes by hundreds of dollars per month versus a weaker file.
Unlike FHA MIP, conventional PMI can be canceled. By federal law, lenders must auto-cancel PMI when the loan reaches 78% LTV based on the original amortization schedule. Borrowers can request earlier removal once they cross 80% LTV based on current value, supported by an appraisal or broker price opinion.
Some conventional programs offer lender-paid mortgage insurance (LPMI) where the lender absorbs the PMI cost in exchange for a slightly higher rate. LPMI sticks for the life of the loan, so it's most attractive when you're confident you won't refinance or sell in the medium term.
Related terms
Other terms you'll see alongside Private Mortgage Insurance
The insurance premium paid on FHA loans, structured as both an upfront charge and an ongoing annual premium.
The loan amount expressed as a percentage of the property's appraised value or purchase price (whichever is lower).
Mortgages not insured or guaranteed by a government agency, typically sold to Fannie Mae or Freddie Mac.
Replacing an existing mortgage with a new one, typically to lower the rate, change the term, or extract equity.
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