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PMI

Private mortgage insurance is designed to protect lenders from borrowers who default on their mortgages and generally covers the top 20% of the loan. PMI is the reason why lenders are willing to take a risk on a home where the buyers have put very little down. Premiums are paid up-front and/or monthly or larger premiums are added onto the loan and financed over the life of the loan.

Not everyone has to purchase private mortgage insurance. You can avoid it by putting a certain amount down (e.g., 20%) or build up enough equity to have it canceled. Congress passed a new law to require an automatic cancellation requirement built in to the servicing of new home mortgage loans.

Some lenders offer low down payment loans that piggy backs a higher rate 2nd mortgage on top of a lower rate 1st mortgage.  It's possible to put as little as 5% down and avoid PMI this way.

Use this calculator to determine whether PMI or a Piggy Back Mortgage is better for you.

The Private Mortgage Insurance Protection Act passed in 1999 requires the percentage amount placed on statement and that the PMI be automatically canceled when your equity reaches 20%. Visit www.privatemi.com or order a consumer guide to canceling PMI by calling (202) 393-5566 or writing to

Mortgage Insurance Companies of America
727 15th Street NW
Washington, DC 20005