Some lenders will waive the PMI requirement if the buyer accepts a higher interest rate on their mortgage loan. The rate increases generally range from .75 percent to 1 percent, depending on the down payment. The advantage to homebuyers is that mortgage interest is tax-deductible, as where PMI premiums are not.

PMI premiums do not last for the life of the mortgage term. Under the Homeowners' Protection Act, for loans closed on or after July 29, 1999, mortgage insurance that is paid directly by the borrower will be canceled automatically when the mortgage balance reaches 78 percent of the home's original value, provided that the borrower is current on payments.

Homeowners whose mortgages originated prior to the enactment of the law are protected by the Act's requirement that lenders notify them of their right to cancel PMI.

We should note that PMI could be paid in monthly installments or as one lump sum premium up front. While you can stop paying the monthly payments the moment you reach an adequate level of equity, you cannot get the premium back if you chose to pay for PMI up front.

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