PMI (Private Mortgage Insurance)

Insurance the borrower pays to protect the lender when the down payment is less than 20%.

PMI is required on conventional loans with less than 20% down. It runs roughly 0.3-1.5% of the loan amount annually, paid monthly with the mortgage. PMI drops off automatically when the loan balance reaches 78% of original value, or can be removed at the borrower's request at 80% LTV with an appraisal. Investors generally avoid PMI by putting 20%+ down on rentals, since rental loans usually require it anyway. FHA loans have a similar but distinct MIP (Mortgage Insurance Premium) that often doesn't drop off.