What is PMI?
PMI stands for private mortgage insurance. It is commonly required on conventional loans when a borrower puts down less than 20 percent. Even though it protects the lender rather than the borrower, it directly affects the borrower’s monthly payment.
Why PMI exists
When the down payment is smaller, the lender takes on more risk. PMI helps offset some of that risk, which is why it often appears on loans with lower equity at the start.
How PMI affects affordability
PMI raises the monthly housing cost. A home that looks manageable when you only estimate principal and interest may feel very different once PMI is added.
When PMI may go away
Depending on the loan and lender rules, PMI may eventually be removed once the loan balance reaches a certain relationship to the home value. Buyers should understand the removal rules before assuming the cost will disappear quickly.
StonePathHome includes PMI in the mortgage calculator because it is a real affordability factor, not a minor footnote.