Why do you have to pay PMI?

Private Mortgage Insurance (PMI) is required by lenders 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, as lower down payments are associated with higher risk. Paying PMI ensures that lenders can offer loans to buyers who may not have substantial savings, making homeownership more accessible. Once the borrower’s equity reaches 20%, they can typically request to have PMI removed.