Private Mortgage Insurance (PMI)
Definition of "Private mortgage insurance (PMI)"
The concept behind a Private Mortgage Insurance (PMI) is pretty simple: it exists to make sure the lender doesn’t lose its money.
What it does is “buy” the possible defaults of a borrower to a lender. Meaning: if the borrower doesn’t pay the premium, the Private Mortgage Insurance (PMI) enters in action and pays it on his/her behalf.
The PMI cost is usually included in the monthly mortgage payment in addition to the principal, homeowner’s insurance, property tax and interest, and just like them, it is a separate thing; it doesn’t build equity to your home.
Why do it?
Well, most of the time you don’t have an option; it is a requirement from the Lender that you get Private Mortgage Insurance (PMI) in order to be able to borrow the money. However, it truly can be good for both parties: the lender doesn’t lose money and the borrower can get a house even if he doesn’t have the whole 20% of the home’s value to use as down payment, since lenders sometimes waive the need of it because of the safety provided by the Private Mortgage Insurance (PMI).
Real estate Tips:
One of the greatest insurances in the world is knowledge! Devour our Real Estate Terms and use our Real Estate Agent Directory to contact a local real estate agent when you're ready to go into the market for/with your house!
Popular Insurance Terms
One named under provisions of the employee retirement income security act of 1974 (erisa) for a terminated pension plan with an unfunded liability for its benefits. ...
Membership organization primarily of medium and small life and health insurance companies. It represents the views and interests of smaller companies in various political forums. ...
Presentation of data that excludes the first 5 to 10 years of experience of those who purchase life insurance. A mortality table shows the number of deaths per 1000 of a group of people. ...
Transaction by a tax-exempt organization with a person from inside the organization (disqualified person) that provides an economic benefit to that person that is in excess of the value of ...
Liability incurred by a party through entering into a written contract. ...
Premium charged (and applied on a uniform basis) for property insurance covering properties at multiple locations. This rate is used under a blanket insurance policy instead of using a ...
Coverage in excess of that provided by a basic hospital medical insurance plan. After the limits of coverage have been exhausted under a basic plan, major medical then covers medical ...
State law that limits the admitted value of an insurance company's EDP equipment to 3% of the company's ADJUSTED SURPLUS. ...
Basic group disability insurance policy for all employees purchased by the employer. In addition, the employer usually purchases an individual disability policy for key executives. ...
Have a question or comment?
We're here to help.