Private mortgage insurance, or PMI, is an extra monthly cost that protects the lender — not you — if you stop paying and the loan defaults. On conventional loans it is usually required when your down payment is less than 20% of the home price.
How much does PMI cost?
PMI typically runs from about 0.3% to 1.5% of the loan amount per year, split into monthly payments. The exact rate depends on your credit score, down payment and loan type. On a $320,000 loan at 0.5%, that is roughly $133 per month.
How to avoid or remove PMI
The simplest way to avoid PMI is to put 20% down. If you already have it, PMI generally drops off automatically once your loan balance reaches 78% of the original home value, and you can often request removal earlier at 80%. Rising home values or extra principal payments can get you there faster.