PMI (Private Mortgage Insurance).

In plain English

PMI is insurance that protects the lender (not you) if you stop paying your mortgage. Conventional loans typically require it when your down payment is below 20% of the home's price. It's added to your monthly mortgage payment and usually costs 0.3% to 1.5% of the loan per year, depending on credit score and down payment size. By law, lenders must automatically remove PMI once you reach 22% equity (with on-time payments), and you can request removal at 20% equity.

01Why it matters

PMI is real money, often $100-$300/month on a typical mortgage, paid for protection that benefits someone else. If you're close to 20% down, scraping together a bit more to avoid PMI can pay off quickly. If you can't, PMI is the price of getting into a house sooner; it's not permanent.

02The math, step by step

On a $400,000 home with 10% down, the loan is $360,000. PMI at roughly 0.7% adds about $210/month, $2,520 per year, or $25,200 over 10 years if you never reach 20% equity. If instead you waited a year and saved another $40,000 to put 20% down, you'd skip PMI entirely. Trade-off: you also paid another year of rent during that time.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT

04Receipts

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