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. PMI protects the lender in case the borrower defaults on the loan, reducing the lender's risk. 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%, they can request to cancel PMI, which can lower their monthly payments significantly.