What is Private Mortgage Insurance (PMI)?

Private Mortgage Insurance, or PMI, is an insurance policy that protects the lender — not the borrower — in the event that a borrower defaults on their mortgage. Lenders typically require PMI when the borrower's down payment is less than 20% of the purchase price (i.e., when the LTV ratio exceeds 80%). PMI is usually added to the monthly mortgage payment as an additional cost and can range from approximately 0.5% to 1.5% of the loan amount annually, depending on the loan terms and the borrower's credit profile.

PMI is an important factor for buyers in the Western Catskills who are purchasing with smaller down payments — a common scenario for first-time buyers or those stretching to enter the market in competitive areas of Ulster or Greene counties. The good news is that PMI is not permanent: once you have built at least 20% equity in the home (through payments, appreciation, or a combination), you can typically request cancellation. By law, lenders are required to automatically cancel PMI once the loan balance reaches 78% of the original purchase price. Buyers should ask their lender specifically about when and how PMI can be removed.