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Glossary

PMI (private mortgage insurance)

Insurance you pay that protects the lender, not you.

Private mortgage insurance is charged when a home loan is taken with less than 20% down. It covers the lender's loss if the loan defaults; it does nothing for the borrower except make the loan possible.

It typically runs 0.3%–1.5% of the loan a year, added to the monthly payment. On a conventional loan it must be cancelled automatically once the balance reaches 78% of the original value, and can usually be requested at 80%.

Today, in real numbers

Buy at $400,000 with 5% down and you borrow $380,000. At today's 6.76% that is about $2,467 a month, plus roughly $253 of PMI until the balance falls to 78% of the purchase price.

See the 30-yr mortgage page
Calculators
Related terms