How Does PMI Work?
A short explainer: why putting less than 20% down triggers PMI, what it costs, and how it comes off automatically as you build equity.
Read the full PMI explainerTranscript
Put less than twenty percent down on a home, and you'll likely pay PMI — insurance that protects the lender, not you. Here's how it works, and how it goes away. PMI is private mortgage insurance. You pay it, but it covers the lender if you stop paying. The upside: it's temporary — it comes off as you build equity. Cost runs roughly half a percent to one and a half percent of the loan each year. On a three hundred thousand dollar loan at about point-eight percent, that's around two hundred a month. And once you reach twenty percent equity, it drops to zero. There are two ways it ends. You can request cancellation once your balance reaches eighty percent of the home's value. And by law, the lender must cancel it automatically at seventy-eight percent. Don't confuse it with FHA's version. Conventional PMI cancels as you build equity. FHA's mortgage insurance, or MIP, often lasts the life of the loan. Two things to check. Automatic removal follows the original schedule, so if your home's value has risen, request cancellation early. And twenty percent down avoids it entirely. See what PMI costs on your own numbers at worthune.com. Worthune turns money decisions into math you can see and re-run — every assumption named. A friend who's good at math. One note: this is educational only, not financial advice. The figures are illustrative. Your situation is unique — talk to a professional before you act.
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AI insights are educational only — not financial advice.