Private Mortgage Insurance (PMI)

Definition

PMI. Mortgage insurance provided by nongovernment insurers that protects a lender against loss if the borrower defaults. Many lenders require a a borrower to purchase private mortgage insurance if the loan they are taking out is 80% or higher of the value of the real estate. In most cases, once the borrower has paid back enough of the loan so that it is less than 80% of the value, the borrow is no longer required to purchase this insurance. Private mortgage insurance has benefits for both borrower and lender; the lender is now protected against default, and the borrower is able to secure a loan with a smaller down payment.
also called lender's mortgage insurance.

Use this term in a sentence

You may want to take on a private mortgage insurance so that you know that you are fully protected at all times.

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We were able to avoid the additional cost of private mortgage insurance by increasing the down payment made upon purchasing our home.

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The private mortgage insurance was sufficient to cover the potential accidents that were seriously concerning the investors of the project.

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