Definition
Insurance required by lenders when a borrower puts down less than 20%, protecting the lender (not the borrower) if you default. It's a tax you pay for not having enough money.
Example Usage
Our PMI was $200/month on a $350,000 loan with 10% down; we'd pay almost $40,000 in PMI before hitting 20% equity.
Origin
Developed in the 1950s as a way to allow sub-20% down payments without requiring FHA loans
Fun Fact
PMI is usually calculated as an insurance premium (not a true fee), which means it compounds—you pay more PMI on a larger loan amount.
Source: Mortgage lending standards; MGIC/PMI industry
Related Terms
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See “Private Mortgage Insurance” in Corporate Speak, Gen-Z Slang, Pirate Speak, and more.
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