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
Same as term Dynamic: changing state of the economy associated with changes in human wants and desires such that losses or gains occur. Dynamic changes are not insurable. ...
Funding of an employee's benefits in a pension plan for his or her beginning past service of employment. This is a significant cost factor in pension planning and financing of future ...
Type of guaranteed investment contract in which the interest rate credited is tied to an external index such as the United States Treasury Bond Index. ...
Policy used to provide the funds for buy and sell agreements under which an income payment or a series of income payments is paid to the buyer of the disabled partner's interest contained ...
State law that limits the admitted value of an insurance company's EDP equipment to 3% of the company's ADJUSTED SURPLUS. ...
Unfunded trust that acts as the owner of a life insurance policy. The trust receives a donor's cash payments on a periodic basis, from which the beneficiary of the trust has a specified ...
Specified amount received by an insured at the end of an endowment period (usually the face amount of the endowment policy), or by the owner of an ordinary life policy (usually the ...
Explicit liability reserve, required by the national association of insurance commissioners (naic), established for all invested asset classes. Specific reserves are established for real ...
Bonds that are less than investment grade plus the bonds that are in or approaching default, which comprise part of the insurance company's investment bond portfolio. ...
Have a question or comment?
We're here to help.