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
Same as term Qualification: The process of determining whether a prospective borrower has the ability to repay a loan. ...
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 ...
Adjustable rate mortgages on which the interest rate is mechanically determined based on the value of an interest rate index. Indexed ARMs are distinguished from Discretionary ARMs, in that ...
A second mortgage on a property that is not paid off when the first mortgage is refinanced. The second mortgage lender must allow subordination of the second to the new first mortgage. ...
Loan applications that are withdrawn by borrowers, because they have found a better deal or for other reasons. ...
Having the builder borrow the money needed for construction. ...
An interest rate index that is used on some ARMs. ...
A credit report contains detailed information regarding the relationship history of an individual with several financial institutions. How do I get a Credit Report?You ask a credit bureau. ...
Someone authorized by the original credit card holder to use the holder's card. While authorized users are not responsible for paying any charges, including their own, they are sometimes ...
Have a question or comment?
We're here to help.