Private mortgage insurance, or PMI, is normally required by your lender when you buy a house with less than a 20% down payment. This insurance helps protect lenders against the cost of foreclosures, and enables them to accept lower down payments from potential home buyers. The PMI cost makes up the difference in equity that the lender would have received with a 20% down payment. Therefore, the lower your down payment, the higher your PMI will be. Your PMI costs are usually automatically added into your monthly mortgage payment.

Although the final decision remains with your lender, you can usually request the cancellation of your PMI once you have paid your loan down to 80% of the original property value. Some lenders may have stipulations that you pay PMI for one or two years before you apply for cancellation. Usually you will have to pay for an appraisal to determine the value of your property, but you should discuss procedures with your individual lender.

PMI can also be cancelled by refinancing and getting a new loan without the private mortgage insurance.

You can avoid PMI altogether by putting a 20% or more down payment on your home, or if you qualify for certain loan programs that do not require it.