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What is Private Mortgage Insurance?

Private Mortgage Insurance, or PMI, is an insurance policy that pays out to a lender in case a homeowner defaults on a mortgage.

The homeowner pays a monthly or one-time premium on their mortgage payments, but the lender is the one getting the protection.

PMI is usually requested for and arranged by the lender, and is offered by private insurance companies. Lenders usually request PMI if the homeowner wishes to put less than a 20% downpayment on the house, and usually require the policy to be in place until there is at least a 20% Loan-To-Value, or LTV ratio on the house. The LTV ratio is calculated simply by taking the value of a loan on a house and dividing it by the value of the house. For example, if a…

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