What Is PMI (Private Mortgage Insurance)?

Short answer

PMI is insurance you pay on a conventional loan when your down payment is under 20%, and it protects the lender, not you. Under federal law you can request cancellation once your balance is scheduled to hit 80% of the original value, and it must end automatically at 78% if you are current (CFPB, as of October 2026). It is the price of buying sooner with less cash.

Definition

Private mortgage insurance (PMI) is required on most conventional mortgages with a loan-to-value above 80%. It is paid monthly, as a single upfront premium, or built into a slightly higher rate (lender-paid PMI).

Worked example

You buy a $450,000 townhouse in Kendall with 10% down ($45,000), so the loan is $405,000 at 90% LTV. Suppose your PMI quote is 0.45% of the loan per year: $405,000 x 0.0045 = $1,822.50 a year, or about $152 a month. Your balance reaches 80% of original value when it hits $360,000. At that point you can request cancellation in writing, and the $152 goes away. Automatic termination comes at 78%, or $351,000.

How PMI is priced

PMI companies price on LTV, credit score, loan type, property type and occupancy. A 95% LTV loan costs more than 90%; a 760 score costs less than a 680. Your loan officer gets live quotes from several PMI providers.

• Borrower-paid monthly: most common, cancellable.
• Single premium: paid once at closing, sometimes by the seller through a seller concession.
• Lender-paid: no monthly line item, but a higher rate for the life of the loan.

PMI vs FHA MIP

PMI goes away; FHA's mortgage insurance premium usually does not unless you put 10% or more down. With a mid-to-high credit score, a conventional loan with PMI is often cheaper over time than FHA. With a lower score, FHA may win. We compare both at conventional loans and FHA loans.

In South Florida

In Miami, where prices are high relative to incomes, PMI is often what lets a family buy with 5% or 10% down instead of waiting years to save 20%. Rapid appreciation in South Florida also helps: if your home's value has risen, some servicers allow early cancellation based on a new appraisal, subject to their seasoning rules. PMI premiums are risk-based, so a condo or a lower credit score costs more than a single-family home with strong credit.