What Is PMI and How Do I Avoid It?

Private mortgage insurance, or PMI, is a monthly premium charged on conventional loans when you put less than 20 percent down. It protects the lender, not you, in case you default on the loan. PMI typically costs between 0.5 and 1.5 percent of the loan amount per year, added to your monthly payment. You can avoid PMI by making a 20 percent down payment, choosing a VA or USDA loan which have their own fee structures, or requesting PMI removal once you reach 20 percent equity in your home.