Mortgage insurance, often called private mortgage insurance, is an insurance that protects a lender in case the borrower defaults on the payment. A majority of lenders require borrowers to pay for a mortgage insurance when the down payment is less than 20% of the loan amount or purchase price of the house.
A borrower can apply for cancellation of mortgage insurance once the paid premium crosses 20% of the LTV or even before.
Great answer by Dmitriy, and to add to that I'd ask "why DO most lenders require Mortgage Insurance?" I mean, they have the house as collateral, right? But they don't WANT the house. They want the mortgage payments, and interest. They want the money. And the most common reason for foreclose is medical problems. So, sure, drop the PMI when you can. That insurance gets the BANK paid. But who pays YOU if you get sick or hurt and can't work? Get private disability insurance. It pays you. Then you can keep paying your mortgage and other bills while you recover and avoid adding a financial disaster on top of a health problem.
WalletHub Answers is a free service that helps consumers access financial information. Information on WalletHub Answers is provided “as is” and should not be considered financial, legal or investment advice. WalletHub is not a financial advisor, law firm, “lawyer referral service,” or a substitute for a financial advisor, attorney, or law firm. You may want to hire a professional before making any decision. WalletHub does not endorse any particular contributors and cannot guarantee the quality or reliability of any information posted. The helpfulness of a financial advisor's answer is not indicative of future advisor performance.
WalletHub members have a wealth of knowledge to share, and we encourage everyone to do so while respecting our content guidelines. Please keep in mind that editorial and user-generated content on this page is not reviewed or otherwise endorsed by any financial institution. In addition, it is not a financial institution’s responsibility to ensure all posts and questions are answered.
Ad Disclosure: Certain offers that appear on this site originate from paying advertisers, and this will be noted on an offer’s details page using the designation "Sponsored", where applicable. Advertising may impact how and where products appear on this site (including, for example, the order in which they appear). At WalletHub we try to present a wide array of offers, but our offers do not represent all financial services companies or products.