Private mortgage insurance (PMI) is an insurance policy that protects your lender in case you default on your mortgage. You may be required to purchase it, especially if you plan to make a down payment of less than 20% of your home's purchase price, which means you have a loan-to-value ratio (LTV) greater than 80%. PMI is purchased through a third-party insurance company and paid via your monthly mortgage payments. How much it costs depends on several factors, but once your LTV is below 80%, you can refinance your mortgage to get rid of the PMI.