NLIC.org

Debra Said:

Is Mortgage Insurance real or a scam?

We Answered:

Private mortgage insurance (PMI) is "real". PMI is often "required" by the lender in cases where the downpayment from the borrower is less than 20%. At 20% or above, it cannot be required.

The "purpose" for the PMI is to "guarantee" pay-off of the mortgage in case the borrower defaults.

Also, once your home value increases to the point where the loan to value ratio is at 78% or less, you can petition your lender to remove the mortgage insurance requirement. I did this when my home increased in value.