GLOSSARY · DEBT & HOUSING

Private mortgage insurance (PMI)

Insurance that protects the lender, not the borrower, on a conventional mortgage with a down payment under 20% of the price. Under the Homeowners Protection Act a borrower in good standing can ask to cancel it once the balance is scheduled to reach 80% of the home's original value, and it ends automatically at 78%. Loans insured by the FHA follow different rules.

Also called: PMI, mortgage insurance

FORMULA

Loan-to-value = loan balance ÷ original value of the home

COMPUTE IT WITH YOUR NUMBERS

Home affordability and mortgage payment →How much house can I afford, and what will the monthly payment be?Down payment savings timeline →How long to save a down payment plus closing costs?

LEARN IT PROPERLY

CHAPTER · EXPENSE REDUCTION & COST AUDITING · STRATEGIESLowering Your Housing Costs CHAPTER · GOAL-BASED SAVINGS & ACCELERATION · STRATEGIESPlanning a Home, a Car and Other Major Purchases

SOURCES

What is private mortgage insurance?. Consumer Financial Protection Bureau.

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