PMI stands for Private Mortgage Insurance. PMI protects lenders against losses that can occur when a borrower defaults on a mortgage.
- PMI is required on first mortgage purchase transactions when the borrower has less than a 20% down payment.
- Likewise, PMI is required on first mortgage refinance transactions when the borrower has less than 20% equity in the property being refinanced.
The cost of the PMI is typically added to the monthly mortgage payment.
You can save money in your monthly mortgage payment by putting more than 20% down on a property, which allows you the option of not having to buy Private Mortgage Insurance.