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
Factor applied in retrospective rating in order to increase the basic premium to cover state premium taxes for liability and workers compensation insurance. For example, if a state premium ...
Type of logic that makes the assumption that what has happened in the past will happen in the future, given the same conditions surrounding the two occurrences. In other words, "History ...
Person, business, or organization specified as the insured (s) in a property or liability insurance policy. In some instances, the policy provides broader coverage to persons other than ...
Clause in a property insurance policy that requires the insurance coverage in that policy to be allocated in the proportion that it bears to the total insurance coverage in force from all ...
Amendment to the law that requires companies that manage retirement plans to permit terminating participants to directly transfer any plan distribution to the individual retirement account ...
Management philosophy developed by W. Edwards Deming, the thesis of which is the continuous improvement in quality through research in customer satisfaction and the empowerment of ...
In general, a civil wrong, other than breach of contract, for which a court will provide a remedy in the form of a suit for damages. Torts include negligent acts or omissions on the part of ...
Person who transfers rights under an insurance or mortgage contract. ...
In property coverage, ratio of the amount of insurance to the value of an insured property. This ratio, multiplied by the amount of the loss, determines the indemnification payment. ...
Have a question or comment?
We're here to help.