Private Mortgage Insurance (PMI) |
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Private mortgage insurance (PMI) is a policy that protects lenders who make loans to individuals who want to buy or refinance a home, but are unable to come up with at least a 20% down payment. PMI plays a valuable role in expanding home ownership. With PMI, families can purchase homes with down payments as small as 3 to 5 percent. In these cases, PMI will be required to be carried on the mortgage, costing the home owners a premium of between $20 to $100 per month, which will be added into their monthly mortgage payment. PMI can be canceled, under certain conditions, when a good payment history is met, and when 20% or more equity is achieved on the cost of the home; i.e., the buyers' outstanding mortgage amount is less than 80% of the home's appraised value. |
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