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PMI, or Private Mortgage Insurance, is an insurance policy that protects your lender if you stop making payments on your home loan.
In Depth
PMI is typically required if you make a down payment of less than 20% when buying a home. It's an extra cost added to your monthly mortgage payment. While it protects the lender, it doesn't offer any direct benefit to you as the homeowner. You can often cancel PMI once you've built up enough equity in your home, usually when your loan balance drops to 80% of the home's original value.
Example
Because they only put 10% down on their new house, John and Jane had to pay PMI every month.