How Much Mortgage Insurance Is Enough?

Mortgage insurance, also known as private mortgage insurance (PMI), exists to protect the mortgage lender in case the borrower defaults on the loan. Many lenders require PMI on any mortgage where new home buyers have a down payment less than 20% of the home's value, or in other situations where the homeowner has less than 20% equity in the home.

Private mortgage insurance may cost you anywhere to .03% to 1% APR of the loan's value, depending on the mortgage lender and your perceived risk as a borrower. It is possible to get different PMI rates from different lenders, and you may be able to negotiate a good rate with yours.

Private mortgage insurance has nothing to do with homeowner's insurance, and should not be confused with home or renter's insurance.