A lender’s protection in case a borrower defaults on the loan. This insurance is typically required if the borrower is unable to put at least 20% down on a house. The cost to the borrower is about .5% – 1% of the entire loan on an annual basis. For a $200,000 home loan that would be $2,000 per year or $166/month.
The fee for PMI does automatically get cancelled when loan to house value ratio reaches 22%, but it can get cancelled at 20% at the request of the borrower.
