Definition: PMI is insurance that protects a conventional mortgage lender against loss if the borrower defaults. It is commonly required when the borrower makes a down payment of less than 20%.
Example
A buyer uses a conventional loan with a 10% down payment. The lender requires PMI as part of the financing.
Keep the distinction clear
PMI protects the lender, not the borrower’s equity or ability to make payments. FHA mortgage insurance is a different program. PMI cancellation depends on applicable rules and loan circumstances, not simply the calendar.
Related terms
Conventional Loan · Loan-to-Value Ratio (LTV) · Federal Housing Administration (FHA)
Keep studying
Loan-to-Value, Down Payments, Equity, and PMI
References: CFPB: Private mortgage insurance
Pronunciation (US): PRY-vit MOR-gij in-SHOOR-unss; PMI: pee-em-EYE (capitals show stress)
Pronunciation reference: Merriam-Webster
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