What is PMI and how do I avoid it?

Private Mortgage Insurance (PMI) is required by conventional lenders when your down payment is less than 20% of the home's purchase price. It protects the lender (not you) against default, and typically costs 0.5–1.5% of the loan amount per year — often $100–$300 per month. You can avoid PMI by making a 20% down payment, or by using a piggyback loan (an 80/10/10 structure: 80% first mortgage, 10% second loan, 10% down). If you already have PMI, you can request cancellation once your equity reaches 20% based on original home value, and lenders are required by law to cancel it at 22% equity.