Private mortgage insurance or PMI as it's called is a way for lenders to protect themselves against losses if you default .

PMI is part of your loan agreement and should not come as a surprise.

PMI or private mortgage insurance is your lender's backup in case you fail to live up to the terms of your mortgage. In these economic times when so many people have defaulted on mortgages, lenders have become extremely careful and take extra precautions to minimize the risk. PMI is one way for them to do that. Mortgage insurance has been around a long time, not just something that has popped up during the recession.

Most people don't realize that it may not be necessary to pay PMI for the entire life of your loan. Once you've established that you are a good risk, about 5 years into your mortgage or according to the terms you have, you may request that the lender remove the PMI. With times as they are, that may not be easy or possible but you can discuss that with your lender.

It is typical for lenders to charge PMI (private mortgage insurance) for loans where less than 20% is given as the down payment. To avoid the charge, save until you can put 20% down, or buy a house of lesser value.

Many people are not paying back their mortgage loans on time, within the time permitted, or defaulting in payments. Mortgage companies realized this activity years ago and decided that mortgage insurance was a necessary evil in order to ensure that lenders would be covered in the event that borrowers could not or failed to make payments as promised. If your having to pay several hundred dollars extra a month for the mortgage insurance something is wrong unless your property and borrowed money is worth upwards of $1 million. Several hundred dollars a month does not seem accurate for the cost of the insurance. When using your online mortgage calculator, ensure that your including both your property taxes and private property insurance (which is different than mortgage insurance) in your monthly mortgage payment. Depending on the value in which your home was appraised determines the cost of yearly taxes. The cost of yearly taxes and property insurance is normally paid out each month into an escrow account at the mortgage company by the property owner. The escrow account can then be used to pay out the cost of property insurance and taxes applicable to the owners property. Huge deductions may be given to the home owner based on how much is paid out on mortgage interest but not insurance. The property and mortgage insurance are not tax deductible for most people in most states. Good thing is any money left over around the month of April in the escrow account is sent back to the owner via a check. Good luck and hope the monthly payment is better understood. bbl242003

If you don't pay enough down, then the lender requires mortgage insurance. If you pay more down, then your lender may not require it. I had to refinance to get out of it on a loan I had. I hope this answers your question. Thank you.

The fact is, you do not need mortgage insurance. It does not help you at all. With that said, let me explain to you what mortgage insurance is, and why it will likely be required of you.

Mortgage insurance is an insurance policy that pays the banks back should you ever default on your loan. If you are asking for a loan of more than 80% of the appraised value of the home, the lender is within their rights to require you to pay for mortgage insurance. This is because if you ever default for any reason, the bank is out money going through the legal channels of foreclosure, and then trying to sell your home. The lenders do not want to be in the business of real estate, they want to be in the business of making loans.

Unfortunately, this means that unless you have saved for a substantial down payment, you are not going to be able to avoid mortgage insurance. Is it worth it to save until you can? It could be, it really depends on your current situation. Best of luck with your home buying!