About PMI Mortgages
PMI stands for private mortgage insurance, an insurance policy that protects lenders in case you default on your mortgage. The insurance is paid by the borrower but only protects the lender.
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Requirements
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Lenders generally require you to pay for PMI if you have to borrow more than 80 percent of the cost of the loan.
PMI Costs
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PMI costs about 0.5 percent of the outstanding balance of your loan per year and is assessed in addition to your monthly mortgage payment.
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Time Frame
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You can request that PMI be canceled when you reach 20 percent equity and lender must usually cancel PMI payments when you reach 22 percent equity.
Considerations
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According to Bankrate, some lenders may not charge you PMI if you agree to a higher interest rate on the mortgage.
Warning
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According to Investopedia, lenders can require PMI payments until you reach 50 percent if you have a high-risk loan, such as a document loan.
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