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
Right of an insured to make additional purchases of life insurance without having to take a physical examination or show other evidence of insurability. Additions can be bought at stated ...
Employee benefit plan that allows the employee to choose among several different benefits offered by the employer. In essence, the employee is provided with the opportunity to make a ...
Health plans established by associations of hospitals and physicians to provide hospital service and care, and medical and surgical care. ...
Costs incurred by an insurance company other than agent commissions and taxes; that is, mainly the administrative expense of running a company. ...
Coverage on an all risks basis through an endorsement to a business property insurance policy in which each sign is specifically scheduled, subject to the exclusions of wear and tear, and ...
Written notice, to be submitted by the claimant, required by the insurance company in the event of an insured peril. This notice is part of the standard property and casualty insurance ...
Language adopted by the national association of insurance commissioners (naic) and recommended or required by state law. While they rarely dictate the language of policies, states often ...
Table used by the Internal Revenue Service (IRS) in evaluating split dollar life insurance plans as to the extent of the economic benefit that is considered taxable ordinary income to the ...
professional designation earned after the successful completion of three national examinations given by the insurance institute of America (IIA). Covers such areas of expertise as ...
Have a question or comment?
We're here to help.