PMI (Private Mortgage Insurance)
PMI is insurance that protects the lender — not you — when your down payment is less than 20% of a home's price. It typically costs 0.2% to 1.5% of the loan amount per year, added to your monthly payment, and can be removed once you reach 20% equity in the home.
PMI lets buyers purchase with a smaller down payment, but it's a pure cost with no benefit to the borrower. Under the Homeowners Protection Act, lenders must automatically cancel PMI once your loan balance reaches 78% of the original home value.
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