Definition

• PMI is a monthly payment made to a lender by a borrower and protects the lender if a borrower defaults on a mortgage.
  
  

Avoid

• PMI can be avoided by having a 20 percent down payment when purchasing a home. Borrowers without a 20 percent down payment may take out a second mortgage, known as a piggyback loan, to cover the 20 percent down payment needed.
  
  

Remove

• When the loan-to-value ratio is 78 percent, a lender is required to remove PMI. Individuals who are considered to be a high risk borrower may be required to have PMI until the equity is at 50 percent.
  
  

Cost

• PMI on average is equal to one-half to 1 percent of the loan but can vary depending on the amount of the down payment.
  
  

Tax Deduction

• In 2007, mortgage insurance became tax deductible. This tax deduction applied only to mortgages issued after Dec. 31, 2006, and before Jan. 1, 2010.