Private Mortgage Insurance (PMI)

Private mortgage insurance (PMI) is insurance that protects a lender or investor against loss if a borrower stops making mortgage payments. It makes it possible for you to buy a house with as little as a 3.5 to 5 percent down payment, helping you buy a home sooner than you otherwise could. The cost of the PMI is included in your monthly payment on the home.

Studies show that homeowners with less than 20 percent invested in a home are more likely to default, making low down payment mortgages more risky for lenders and investors. That's why lenders and investors will require mortgage insurance for loans with down payments of less than 20 percent.

The above information was obtained from www.privatemi.com.

If you cannot put down 20% when you purchase your home, as your home value goes up over the years, and as you pay on your principal balance; you may eventually have 20% equity. Contact your lender for their procedures on removing mortgage insurance. Some lenders may require an appraisal, but the cost of an appraisal is well worth the savings you will receive. Be sure to check this yearly, because most lenders are not kind enough to remove it for you. In most cases, you will need to contact them if you believe you now have the 20% required equity.  If are already a homeowner, call me if you think you may have 20% equity, and I can help you determine if it is time to make that call to your lender.