PMI, or private mortgage insurance, is a type of mortgage insurance required by some lenders when a borrower has less than a 20% down payment. PMI typically costs between .5% to 1% of the loan value, paid annually. If for example, you have a loan worth $300,000 and you only have a low down payment, you may end up paying as much as $3,000 annually for PMI, which could amount to monthly payments of $250.