Definition
Insurance required by conventional lenders when the down payment is less than 20% of the home's purchase price. PMI protects the lender (not the borrower) against default. PMI typically costs 0.5-1.5% of the loan amount annually ($145-$435/month on a $350,000 loan). PMI can be removed once the LTV reaches 80% (20% equity), and automatically terminates at 78% LTV.
Related Mortgage Terms
- Down Payment
The upfront portion of the home's purchase price paid in cash by the buyer. Conv...
- Loan-to-Value Ratio (LTV)
The ratio of the mortgage amount to the appraised property value, expressed as a...
- Mortgage Insurance Premium (MIP)
The mortgage insurance required on FHA loans, consisting of an upfront premium (...
- Amortization
The process of paying off a mortgage through regular monthly payments of princip...
- Annual Percentage Rate (APR)
The total annual cost of a mortgage expressed as a percentage, including the int...
Understanding mortgage terminology helps you compare loan offers and make informed decisions. Use our mortgage calculator to see how these terms affect your monthly payment.