How PMI works
When your down payment is under 20%, the lender sees more risk, so it adds PMI to your monthly payment. PMI typically costs around 0.3% to 1.5% of the loan amount per year, depending on your down payment and credit. On a $300,000 loan at 0.5%, that is roughly $125 a month — money that benefits the lender, not you.
How to get rid of PMI
PMI is not forever. As you pay down the loan (and as your home appreciates), your equity grows. You can usually request PMI removal at 20% equity, and by law it generally must drop automatically at 22% equity on conventional loans. A 20%+ down payment avoids it from the start.
Why it matters
PMI is part of your true monthly housing cost, so it affects how much house you can afford.
See PMI in your payment
Estimate a monthly mortgage payment including taxes, insurance and PMI.