Private Mortgage Insurance (PMI) is a type of insurance that lenders require when a borrower makes a down payment of less than 20% on a home. It protects the lender in case the borrower defaults on the loan. Essentially, PMI helps make it possible for people to buy homes without needing a large upfront payment. Borrowers typically pay PMI as a monthly premium added to their mortgage payment, or as a one-time upfront fee. Once the homeowner builds enough equity in the home—usually when they reach 20% equity—PMI can often be canceled, reducing monthly expenses.