like you're 5
you borrow the bank's bike and it makes you pay for a scratch-repair plan. if you crash, the plan pays the bank. you still walk home.
use it in a sentence
“we put 8% down, so we’re paying PMI until we hit 20% equity.”
good to know
on a conventional loan you can usually request cancellation at 20% equity, and it drops automatically at 22%. FHA loans are different — that mortgage insurance often lasts the life of the loan. PMI is a cost, not a punishment: waiting years to avoid it can cost more than paying it.