If you’re considering purchasing a home or if you have purchased a home you have probably heard the term PMI thrown around. PMI stands for Private Mortgage Insurance but most people simply call it PMI. Not everyone has to pay a PMI, it is typically added to home loans if the borrower doesn’t have at least a 20% down payment on the purchase price.
PMI insurance can vary but the general range is somewhere between half and one percent and is designed to protect the lender in case the borrower defaults. It’s doubtful that the PMI actually does anything to protect the borrower but PMI is an accepted industry practice and isn’t going anywhere soon, so if you don’t have 20% to put down on your home then you’ll have to pay a PMI.
One thing to keep in mind during the course of your loan is the amount of principal you’ve paid. Once you’ve paid off 20% of your home’s assessed value you can approach your lender and ask them to remove the PMI. One would think that this would automatically be figured by your mortgage broker but it’s not so it’s something every mortgage holder with PMI should keep track of as it can save you thousands over the life of your loan.