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 Mortgage Terms
A written document evidencing the lien on a property taken by a lender as security for the repayment of a loan. The term 'mortgage' or 'mortgage loan' is used loosely to refer both to the ...
One or more persons who hove signed the note and are equally responsible for repaying the loan. When One Co-Borrower Has Much Better Credit than the Other: A problem that arises frequently ...
A mortgage loan transaction in which the lender assumes responsibility for an existing mortgage. A wrap-around can be attractive to home sellers because they may be able to sell their ...
A collateralized debt obligation, also known as CDO, defines a complex financial product. Various loans, mortgages, bonds, and valuables back this commodity, and institutional investors ...
Charging unwary borrowers interest rates and/or fees that are excessive relative to what the same borrowers could have found had they shopped the market. ...
Inserting provisions into a loan contract that severely disadvantage the borrower, without the borrowers knowledge, and sometimes despite oral assurances to the contrary. Prepayment ...
A non-citizen with a green card employed in the U.S. Non-permanent resident aliens are subject to somewhat more restrictive qualification requirements than U.S. citizens. Permanent ...
A clause in the note that allows the lender to demand repayment of the balance in full. A demand clause is even better (for the lender) than an acceleration clause. An acceleration clause ...
Housing expense plus current debt service payments. ...
Have a question or comment?
We're here to help.