Private mortgage insurance policies were created to reimburse a lender for the losses incurred when a borrower defaults on their mortgage and the house isn’t worth enough to repay the loan. Most lenders require PMI when a borrower makes a down payment of less than 20%. Provided the account is in good standing, you can cancel most policies when you reach 20-25% equity in the home. Occasionally an appraisal will be required in order to remove the PMI.
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