Private Mortgage Insurance (PMI)

Definition of "Private mortgage insurance (PMI)"

Paul Van Zandt real estate agent

Written by

Paul Van Zandtelite badge icon

Realty Professionals of Texas

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!

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Insurance Terms

Historical record of dividends paid. ...

Plan under the employee retirement income security act of 1974 (ERISA) for employees who are less than 50% vested. An employee must be permitted to buy back retirement benefits lost because ...

Policy owner rights under a life insurance policy, including the right to name a new beneficiary at any time and to surrender the policy for its cash value. ...

Entity that offers a managed care plan for workers compensation benefits that joins a provider network with the following parts: case management personnel, medical bill review personnel, ...

Same as term Associate in Automation Management: professional designation earned after the successful completion of three national examinations given by the insurance institute of America ...

Documentation of loss required of a policyowner by an insurance company. For example, in the event of an insured's death, a death certificate (or copy) must be submitted to the company for ...

Study of buying habits of consumers to determine their insurance needs. ...

Employee of the insurance company who has the authority to appoint brokers on behalf of the insurance company. This supervisor has the objective and responsibility to sell the insurance ...

Coverage by at least two insurance policies providing the same coverage for the same risk. ...

Popular Insurance Questions