PMI stands for "Private Mortgage Insurance."  PMI is an insurance policy taken out by a mortgage company to protect the lender in case you are unable to make your mortgage payments and the lender forecloses. However, PMI does nothing to protect you, the borrower. When you took out the loan to purchase your home, the lender added the cost of this insurance to your monthly payment unless you made at least a 20% down payment. Once you pay off enough of the loan to meet this 20% threshold, you are eligible in almost all cases to have this payment dropped if an appraisal shows that your loan is really 80% or less of your current home value. Since most homes generally increase in value, this condition is frequently met before 20% of the loan is paid off.