Term Tuesday: PMI

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Private Mortgage Insurance, or PMI, protects your lender in the event of a default.You must have PMI as part of your loan if the down payment on your home is less than 20% of the price.

It is possible to cancel private mortgage insurance on a conventional loan. Once the equity in your home rises above 20%, contact your lender to discuss this possibility. If you have an FHA loan, you may cancel your PMI after you have paid your loan to 78% of the original principal balance and after 5.5 years. PMI is not required for a VA loan.

Speak with your lender about various other ways to avoid PMI, including paying a higher interest rate or obtaining a HomePath mortgage.