Insurance
Private Mortgage Insurance
Insurance that protects the lender (not you) if you default on a conventional mortgage with less than 20% down. PMI typically costs 0.5% to 1.5% of the loan amount per year, added to your monthly payment. On a $300,000 loan, that is $125 to $375 per month. You can request PMI removal when your equity reaches 20%, and it is automatically canceled at 22%. This is different from MIP on FHA loans, which is harder to remove.
Why It Matters
Private Mortgage Insurance 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 private mortgage insurance covers and what it does not helps you make smart decisions about the level of protection you need.