PMI — private mortgage insurance — is a monthly charge on most loans with less than 20% down. You pay for it, but it protects the lender, not you.
PMI typically runs 0.5% to 1% of the loan amount per year. On a $400,000 loan, that is $2,000 to $4,000 a year, or $170 to $330 a month, added to your PITI.
With a small down payment, you have little equity. If you default, the lender loses money. PMI shifts that risk to an insurer.
Put down 20%. No PMI, ever. That is the clean answer.
Once your loan-to-value ratio reaches 80% (or 78% automatically), you can request PMI cancellation. It does not always happen automatically — call your lender and ask.
FHA loans have mortgage insurance premiums (MIP) instead, and they usually last the life of the loan. That is a big reason conventional loans win for buyers with strong credit.
See exactly what PMI adds on our calculator — it is a separate line in the payment breakdown.
Reading is step one. Step two is running your own numbers — taxes, insurance, PMI and all.
Open the mortgage calculator