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Private Mortgage Insurance (PMI)

Definition of term

Private Mortgage Insurance (PMI) is insurance that protects lenders against loss if a borrower defaults on a mortgage. Private Mortgage Insurance (PMI) protects the lender, not the homeowner. PMI is required if you have a conventional loan and make a down payment of less than 20 percent of the purchase price. The lender can remove PMI when you reach 22 percent equity in your home, based on the original purchase price. Borrowers can request that the lender remove PMI when you reach 20 percent equity if your property has increased in value, made timely mortgage payments, or met other requirements. Contact your lender to discuss removal options if you're still paying for PMI after reaching 22 percent equity.

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