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
Provision that excludes from coverage under Form No. 3: flood damage, except if the flood causes a fire, explosion, or theft; water damage from the backup of sewers; earthquake, except if ...
Transaction in which the property owner (for example, a pension fund) agrees to pay the insurance company a rate of return tied to the fluctuations in real estate prices. In return, the ...
Disposition or transfer of property at time of death. Although the law provides that property may be transferred at death only by means of a will that meets the requirements of state ...
Legal case in which the United States Supreme Court held that pension assets are to be excluded from the bankruptcy estate of the plan participant. ...
Additional policy dividend paid to a life insurance policyholder when a policy terminates. A mutual insurance company is owned by its policyholders and writes participating policies, which ...
Vehicle that is available to anyone in the United States as a means for savings in a tax-exempt fashion for college, graduate, or professional schools or other eligible accredited business, ...
Clause in an insurance policy that describes the administration and submission of claims procedure. ...
Provision in a life insurance policy that death benefits will not be paid in the event an insured dies from war-related causes; or in lieu of a death benefit there is a return of premiums ...
Legislation that makes insurance fraud a federal crime. This act is part of the Omnibus Crime Bill. Under the act, it is a federal crime to embezzle or misappropriate funds, money, or ...
Have a question or comment?
We're here to help.