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
Bodily or emotional injury resulting from physical or mental wound or shock. A traumatic injury is caused by something outside the person's body as opposed to a sickness or a disease. An ...
Special endorsement to personal automobile policy (pap) covering loss of records, tapes, and other sound equipment caused by an insured peril in an insured automobile. ...
Provision in workers compensation insurance under which an employee who incurs an injury in another state, and elects to come under the law of his home state, will retain coverage under the ...
Employer, association, labor union, or other group ...
Coverage for personal effects of a tourist, including apparel, books, toilet articles, watches, jewelry, luggage, portable typewriters, photographs and photography equipment and supplies. ...
Vesting, deferred or vesting, immediate under which the accrued benefits of the employee increase on a percentage basis (according to years of service and/or attained age) until 100% ...
Rule that provides four requirements for monitoring the independent agent distribution system: The insurance company must be involved in the training of the independent agent. The ...
Portion of a federal law that imposes a penalty excise tax on an excess benefit transaction of 25% of the excess benefit on the person from inside the organization (disqualified person) ...
Largest property and casualty insurance company trade association in the world (international membership)whose objectives include the service of its membership through positive legislation ...
Have a question or comment?
We're here to help.