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
Method of selling insurance directly to insureds through a company's own employees, through the mail, or at airport booths. The company uses this method of distribution rather than ...
Insurance for private pleasure boats. Coverage is not standard, but is generally broken down into insurance for yachts, including sailboats; boats with inboard motors under marine ...
Same as term Line Limit: maximum amount of a specified type of insurance coverage, according to underwriting guidelines, that an insurance company feels it can safely underwrite on a ...
Same as term Convention Examination: audit of the convention blank (NAIC Statement Blank) every third year as to all of the financial activities of a company; company claim practices; and ...
Same as term Occurrence Basis: coverage, in liability insurance, for harm suffered by others because of events occurring while a policy is in force, regardless of when a claim is actually ...
Legislation that redefined life insurance and raised taxes on life insurance companies. Among the provisions were new rules for some life insurance products, including a definition of ...
Includes rate of return, how long the annuity's interest rate is guaranteed, loads (front, middle and back), financial ranking of the insurance company offering the annuity, the monthly ...
Gross yield minus total costs (expenses). ...
Phrase used to describe a method of annuity payout that guarantees a specified number of years, regardless of whether an annuitant remains alive. ...
Have a question or comment?
We're here to help.