Private mortgage insurance (PMI) is a policy designed to protect the mortgage lender by reimbursing them up to a certain dollar amount in the event that the borrower defaults on the loan and the house isn't worth enough to repay the lender in full through a foreclosure sale. PMI’s are required on most loans where the borrower has a down payment of less than 20%. 

PMI premiums are paid monthly and on average cost around 1 ½% of the total mortgage loan. PMI’s can normally be cancelled once the equity in a home reaches 20-25%, so long as the monthly mortgage payments were paid on time. 

Last updated on November 11, 2010 by Admin