Insurance
PMI
Private Mortgage Insurance — see the full entry under Private Mortgage Insurance. PMI is required on conventional loans when you put less than 20% down and typically costs 0.5% to 1.5% of the loan amount per year. It can be removed once you reach 20% equity, and is automatically canceled when you reach 22% equity based on the original purchase price.
Why It Matters
PMI is part of the safety net that protects your investment in a home. While insurance adds to your monthly costs, going without adequate coverage puts your finances at serious risk.
Review your insurance needs carefully before and after closing. Understanding what pmi covers and what it does not helps you make smart decisions about the level of protection you need.