If the down payment on your loan is less than 20 percent of the sale price or value of the home that you are purchasing, then you must by private mortgage insurance.This helps to protect the mortgage company against any chance that you will default on your loan.PMI usually runs about one half to one percent of the total loan.

Most homeowners must purchase PMI insurance because affording a 20 percent down payment on their mortgage is too expensive.Some loan companies will forfeit the PMI insurance if the purchaser will agree to pay a high interest rate.The advantage to this is that mortgage interest is tax deductible.