Private mortgage insurance (PMI) is a type of insurance that lenders require from borrowers who make a down payment of less than 20% on a home. PMI protects the lender in case the borrower defaults on the loan, reducing the risk associated with lending to someone with a smaller down payment. Borrowers typically pay PMI as a monthly premium added to their mortgage payment, or as a one-time upfront premium. Once the borrower builds enough equity in the home, usually reaching 20% equity, they can request to cancel PMI, potentially lowering their monthly payments.