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Can I use term life insurance instead of PMI?

I have to close tomorrow and my good faith estimate has me paying $500 for PMI, I am in Texas, can anyone explain this for me?

A PMI is a Private Mortgage Insurance that protects the lender in case you default on the loan. A PMI is included in your mortgage bill until you paid 20% of the principal balance of the actual loan. For example, if your house was bought for $100,000, you would need to pay 20% of the balance to get rid of the PMI, which is $80,000.

You could of avoid the PMI if you make a 20% down payment on your home.

As for your life insurance, that will help pay the mortgage if you die. If your mortgage company is offering you "mortgage insurance" or life insurance, don't take it. The type of life insurance they are offering you is called "Decreasing Term insurance." This is where the death benefit decreases over time, but the premiums may remain the same. This will only cover the mortgage balance. If you have other debts and financial obligations, then get a 30 year level term insurance.

As you can see, you can't substitute PMI for term insurance. They are two different products. PMI is a loan insurance and term insurance is life insurance. Source(s): http://finance1o1.blogspot.com

Dude, NO! Life insurance and private mortgage insurance (PMI) are two very different things. Are you sure you know what you're doing?
PMI should cover lots of things that term life does not cover. I would suggest you find out the legal requirements for PMI first.

Also - make sure you track your loan. I have heard that lenders won't neccisarily tell you when you've paid off enough to stop paying PMI.
It's not going to happen.

Mortgages are a commodity. In order for a bank - any bank - to be able to sell a mortgage, there have to be certain "things" about it. One of those things is, either you have 20% equity (usually by putting 20% down), OR, PMI applies to the mortgage.

Term insurance will NOT fulfill that. Also, PMI doesn't only cover if you die - it covers if you DEFAULT. If you get disabled, term won't do a blessed thing. If you lose your job, ditto. PMI covers things (for the bank only, note) that the term never would.

So your mortgage would have little or no value to a mortgagee - as it wouldn't be sellable - without PMI.
texas agent
It has always been my position that you speak to licensed people to find out what you need. Period. PMI does cover your mortgage and provides a benefit to THE BANK, should you lose your job or become disabled. You need to speak to an agent and see other, more cost effective, or more valuble(to you) coverge options. One could be a term policy coupled with a disability income policy. Or, it could be a whole life policy with a disability income rider attached. You might also want to look into disability income (long-term) through your employer. Any of these options, (and they might not be good for you, you need to speak to a professional first), would give a payout to YOU OR YOUR FAMILY. Is that important? Long story short, talk to a licensed agent in your area, and they can get your exact needs, and wants and can find the right fit for you. Good luck, and congrats on the house.