Also found in: Dictionary, Thesaurus, Medical, Legal, Acronyms, Encyclopedia, Wikipedia.

Private Mortgage Insurance (PMI)

Policy protecting the holder against loss resulting from default on a mortgage loan.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Private Mortgage Insurance

An insurance policy that a mortgage holder buys on behalf of a lender, protecting the lender in the event of default on the mortgage. Most lenders require their mortgage borrowers to purchase PMIs if the mortgage's loan-to-value ratio is more than 80%. Generally speaking, annual premium payments on PMIs are equal to 0.5% of the value of the mortgage at the time it is borrowed. When the loan-to-value ratio falls below 78%, most lenders are required to inform homeowners that they may cancel their PMI policies. Some borrowers avoid PMI by taking out a piggyback mortgage, that is, a second mortgage allowing one to borrow up to 100% of the home's value in which the loan-to-value ratio is approximately 80% in the first mortgage and 20% in the piggyback.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

Private mortgage insurance (PMI).

When you buy a home with a down payment of less than 20% of the purchase price, your lender may require you to buy private mortgage insurance (PMI), which protects the lender against the risk that you may fail to repay your loan.

The premiums you can expect to pay will vary, but typically come to about 0.5% of the total amount you borrow.

For instance, on a $150,000 mortgage, a typical annual PMI premium would be $750, which is 0.5% of $150,000. Divided into monthly payments, this premium would come out to $62.50 a month.

You can usually cancel your PMI when you meet certain criteria. Generally, this is when the balance of the mortgage is paid down to 80% of either your home's original purchase price or its appraisal value at the time you took out the loan. You can check if it's possible to cancel your PMI by reviewing your annual mortgage statements or by calling your mortgage lender.

If you forget to cancel your PMI, your lender is required by federal law to end the insurance once your outstanding balance reaches 78% of the original purchase price or appraisal value at the time you took the loan, or you have reached the mid-point of the loan term, provided you meet certain requirements.

The lender must give you information about the termination requirement at closing. There are some exceptions to the termination rule, including high risk mortgages, VA and FHA mortgages, and those negotiated before July 29, 1999.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.


See private mortgage insurance.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.


See Private Mortgage Insurance.

The Mortgage Encyclopedia. Copyright © 2004 by Jack Guttentag. Used with permission of The McGraw-Hill Companies, Inc.
References in periodicals archive ?
Vukotic credits the company's reputation and the evolution of its product offering as the main factor that attracted a company like Kyoto to purchase PMI. The company opened its doors in 1993 in the Chicagoland area, selling vertical cartoners.
History of PMI Foods in Utah PMI Foods began as a strategic international partnership between a U.S.
PMI is the world's leading not-for-profit professional membership association for the project, program and portfolio management profession.
Comment: Endeavour Capital Fund VII investment in PMI funds acquisition
The PMI data will be available on the Bloomberg Professional service to coincide with the release of the Flash PMI survey data on March 24, 2014.
PMI said that the country's cigarette industry fell 15.6 percent in 2013, while PMFTC's output dropped by a hefty 26.2 percent.
China's official PMI rose to 51.4 in October from 51.1 in September, topping expectations for a reading of 51.2.
A modest rise in the May PMI and steady sub-indices suggest the recovering trend in China's economy becomes more obvious, said Zhang Liqun, an analyst from the Development Research Center of the State Council.
The PMIEF and PMI have resources available for teachers and administrators, including curricula, lesson plans and training materials.
The main contributor to composite PMI dynamics was an increase in new orders, signalling some stabilisation in demand.
Advisory board members provide directional support and resources to PMI in the areas of policy, planning, evaluation, development, and public relations.
The ongoing saga involving PMI Mortgage Insurance and CUNA Mutual Group Mortgage Insurance entered into a new stage on Thanksgiving Eve when the PMI Group, PMI MI's holding company, filed for bankruptcy in federal court.