When looking for a home and deciding on a budget, lots of homebuyers use those mortgage calculators and come up with a budget. However, lots of times, people don't consider the extra things that are added to mortgages. PMI is sometimes one of those things!
PMI stands for Private Mortgage Insurance. PMI is usually added to a mortgage if the borrower doesn't put 20% down. It helps to protect the lender if the borrower is not able to pay off the loan and the lender is not able to recover those losses after a forclosure and sale of the mortgaged property.
Paying PMI is a good option for those that can't pay 20% down on a home. However, it is an extra cost. It usually cost between .5%-1% of the loan amount annually. So based on the 1% figure, a person with a $100,000 loan will pay $1000 a year, or $83.33 a month. Here is a link to a PMI calculator to help give you an idea of the cost for your particular situation!
Typically, once your home equity reaches 20%, you no longer have to pay PMI.
I read a very informative article about PMI at Realtor.com. Check out the article for more details about PMI
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