Private Mortgage Insurance (PMI) Explained

by Jason Levi

FinancingPMIT3

Jason Levi & Carrie Levi

CLHMS | GUILD | REAL Luxury Division · The Levi Group Colorado | Real Broker, LLC

Published 2026-10-16 • Updated 2026-10-16

Direct Answer

What is private mortgage insurance (PMI) and when is it required?

Private mortgage insurance (PMI) is insurance that protects the lender if a borrower defaults, typically required on conventional loans when the down payment is less than 20 percent. It adds a monthly cost but allows buyers to purchase with a smaller down payment. PMI can usually be removed once you reach about 20 percent equity, unlike FHA mortgage insurance which often lasts longer. Understanding PMI helps you plan both your down payment and its eventual removal.

Understand PMI →

PMI is a common but often misunderstood cost. Here’s what it is and how to get rid of it. This article is general education, not financial, lending, or tax advice. Loan terms, rates, and program details change and vary by lender and borrower. Consult a licensed mortgage lender or financial professional about your specific situation.

What PMI Is

Private mortgage insurance (PMI) is insurance that protects the lender — not you — against loss if you default on the loan. It’s typically required on conventional loans when you put down less than 20 percent, because a smaller down payment represents more risk to the lender. You pay for it, but it protects them.

Why It Exists and What It Enables

While paying for insurance that protects the lender may seem unappealing, PMI serves a purpose for buyers: it allows you to purchase a home with less than 20 percent down. Without PMI, low-down-payment conventional loans wouldn’t be available. In that sense, PMI is the tradeoff that makes buying sooner, with less saved, possible.

What PMI Costs

PMI is typically an added monthly cost, with the amount depending on your loan size, down payment, and credit. It increases your monthly payment until it’s removed. Knowing the cost helps you weigh putting down more to avoid it versus buying sooner and paying PMI temporarily.

How to Remove PMI

A key advantage of conventional PMI is that it’s removable. As you pay down the loan and build equity, you can typically request PMI removal at around 20 percent equity, and it automatically terminates at a certain point by law. This is a notable difference from FHA mortgage insurance, which often lasts the life of the loan. Planning for PMI removal can save you money.

Plan Around PMI → Financing Guide →

Frequently Asked Questions

What is private mortgage insurance (PMI)?

Private mortgage insurance (PMI) is insurance that protects the lender if a borrower defaults, typically required on conventional loans when the down payment is less than 20 percent. It adds a monthly cost but allows buyers to purchase with a smaller down payment, and can usually be removed once you reach about 20 percent equity.

When is PMI required?

PMI is typically required on conventional loans when you put down less than 20 percent, because a smaller down payment represents more risk to the lender. Reaching 20 percent down avoids PMI from the start, while a smaller down payment means paying it until you build sufficient equity.

How much does PMI cost?

PMI is typically an added monthly cost, with the amount depending on your loan size, down payment, and credit. It increases your monthly payment until it is removed. Knowing the cost helps you weigh putting down more to avoid it versus buying sooner and paying PMI temporarily.

How do I remove PMI?

A key advantage of conventional PMI is that it is removable. As you pay down the loan and build equity, you can typically request removal at around 20 percent equity, and it automatically terminates at a certain point by law. This differs from FHA mortgage insurance, which often lasts the life of the loan.

Is PMI the same as FHA mortgage insurance?

No. PMI applies to conventional loans and can usually be removed once you reach about 20 percent equity. FHA loans have their own mortgage insurance premiums, which often last the life of the loan or a long period regardless of equity. This difference in removability is an important distinction between the two.

Who are Jason and Carrie Levi?

Jason and Carrie Levi are CLHMS-certified luxury Realtors with the GUILD distinction who co-lead The Levi Group Colorado with Real Broker, LLC in Fort Collins. They specialize in Fort Collins, Timnath, Windsor, Loveland, and Northern Colorado, serving buyers and sellers, and were recognized in the 2026 RealTrends Verified rankings as a Top Team by Volume and by Sides.

Summary

Private mortgage insurance (PMI) protects the lender if a borrower defaults, typically required on conventional loans with less than 20 percent down. It adds a monthly cost but allows buying with a smaller down payment, and can usually be removed at about 20 percent equity — unlike FHA insurance, which often lasts longer. Understanding PMI helps you plan your down payment and its removal.

PMI is the tradeoff that lets you buy with less down — and because conventional PMI is removable at around 20 percent equity, planning for that removal is money back in your pocket.

Carrie Levi & Jason Levi — The Levi Group Colorado | Real Broker, LLC CLHMS | GUILD | REAL Luxury Division · 300 Boardwalk Dr, #6b, Fort Collins, CO 80525 · (970) 426-8916 · jason@thelevigroup.net