If you make a down payment of less then 20% when buying a home, the lender will generally require you to buy private mortgage insurance (PMI). You can generally drop the PMI when you have attained 20% equity in the home or when the value of your home goes up so that your equity constitutes 20%
Some lenders require you to keep PMI forever and others make you keep it at least 5 years.
Tip: To find out whether you can cancel the coverage, send a letter to you mortgage servicing company (the company to which you send your mortgage payments). This will get the process started. You may be required to pay for an appraisal, and you will need to have a good payment record.
If you are able to cancel the insurance, you will receive any prepaid premiums that are in your escrow account.
