Private mortgage insurance, also called PMI, is a type of mortgage insurance you might be required to pay for if you have a conventional loan.
Like other kinds of mortgage insurance, PMI protects the lender—not you—if you stop making payments on your loan.
If you're current on your mortgage payments, PMI will automatically terminate on the date when your principal balance is scheduled to reach 78% of the original appraised value of your home.
If you choose to use PMI, be sure to talk with your lender about these specific details of your policy.
Home buyers who put at least 20% down don't have to pay PMI, and they'll save on interest over the life of the loan.
Putting 20% down is likely not in your best interest if it would leave you in a compromised financial position with no financial cushion.
To avoid PMI for most loans, you'll need at least 20 percent of the home's purchase price set aside for a down payment.
For example, if you're buying a home for $250,000.00, you need to be able to put down $50,000.00
To get rid of PMI on mortgage.
Wait until you qualify for automatic or final termination of PMI.
Request PMI cancellation when mortgage balance reaches 80% .
Pay down your mortgage earlier.
Refinance your mortgage.
Reappraise your home.
Expand or renovate your home to increase its value.
The PMI which stands for Private Mortgage Insurance must be kept on your mortgage and you have to continue paying the PMI for a period of 2 years or until your home has built up at least 25% equity which usually occurs within 2 to 5 years.
After 5 years of holding the home mortgage you only require 20% equity in your home to be able to stop paying Private Mortgage Insurance.
So expect to have to pay PMI or Private Mortgage Insurance for up to 5 years in most cases.