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
Funds paid by an insurance company associated with the normal costs of doing business other than the costs of claims payments. ...
Act that makes the liability cost for cleanup joint and several. Even if a party is only partially responsible for losses inflicted, that party may be liable for the payment of the total ...
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 ...
Authority of states to tax the insurance companies they regulate. States levy income taxes, real and personal property taxes, and special levies, the most important of which is a premium ...
Crime against the state for which an officer of the state can bring legal action. Society is harmed by an individual breaking the laws of the state. Usually there is no statue of ...
Insurance for which premiums are charged according to the size of the face amount of the policy, so that the greater the face amount, the lower the cost per $1000 unit of insurance. ...
Securities that derive their value from other financial instruments that are used by the insurance company to hedge its bets on which direction the market is moving. For example, cattle ...
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 ...
transfer of money from or an employer-sponsored pension or other qualified plan into an INDIVIDUAL RETIREMENT ACCOUNT (IRA) with out paying tax on the distribution. transfer of money from ...
Have a question or comment?
We're here to help.