Mortgage Dictionary

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PMI (also known as private mortgage insurance and mortgage insurance) protects the lender, if the buyer defaults on mortgage payments. It is often required for loans with small down payments (less than 20% of the home's fair market value). Usually, buyers can avoid this expense by making a larger down payment.

PMI is usually around $55 per month for every $100,000 borrowed (until the principal on the loan falls below 80% of the home's fair market value). Many mortgage companies bundle mortgage insurance into the monthly mortgage payment, along with principal, interest, property taxes, and hazard insurance.

The various mortgage calculators on this website give users an option - users can include PMI in the computation, or they can leave it out.

See also:   Mortgage and Home Financing Costs