What is PMI and when can I stop paying it?

PMI stands for Private Mortgage Insurance, which lenders require when you put less than 20% down on a conventional home loan. It protects the lender, not you, if you default. The cost typically ranges from 0.5% to 1.5% of the loan amount annually, added to your monthly payment. You can stop paying PMI once you reach 20% equity in your home. This happens automatically by law when your loan balance reaches 78% of the original purchase price, under the Homeowners Protection Act. You can also request cancellation at 80% loan-to-value by contacting your lender, though they may require an appraisal. Paying down your principal faster or rising home values can help you reach that threshold sooner.