In today's market, the old rules of thumb about private mortgage insurance have changed dramatically. Today, there are two ways to bypass these requirements and eliminate mortgage insurance.
Mortgage insurance is a credit guarantee for lenders that allows low down payment loans.
The negative to mortgage insurance requirements is that the borrower has to pay for the insurance coverage even though it is the lender that is being protected. Mortgage insurance charges vary depending on the percent of down payment and the total loan amount. Moreover, this payment is not tax deductible. Under the first scenario, a mortgage insurance requirement is waived in exchange for a higher interest rate on the mortgage loan. The higher rate without mortgage insurance does work out to be a few dollars less per month than the regular rate with mortgage insurance.