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
Amount of required capital that the insurance company must maintain based on the inherent risks in the insurer's operations. These risks include asset depreciation risk, credit receivables ...
Property to be insured, or that is insured, which is located within the specific geographical region falling under the auspices of the fire department. ...
Loss of a key person due to death, disability, sickness, resignation, incarceration, or retirement. Because of the expertise of such an individual, there could be a loss of income, market ...
Exclusion of coverage in marine insurance if damage or destruction of property results from war, capture, or seizure. ...
Covers all employees of a business on a blanket basis with the maximum limit of coverage applied separately to each employee guilty of a crime. ...
Retirement plan under which benefits are fixed in advance by formula, and contributions vary. The defined benefit plan can be expressed in either of two ways: Fixed Dollars: Unit benefit ...
Quality of investments of insurance companies. State insurance regulators establish rules for company investments. Authorized investments vary, depending on whether a company is a life ...
Choice of beneficiary in which the death benefit of a life insurance policy is retained by the company to be paid as a series of installments of fixed dollar amounts per installment until ...
a large number of homogeneous exposures (in order for the deviation of actual losses from expected losses to approach zero, and thecreditability of the prediction to approach one). loss ...
Have a question or comment?
We're here to help.