Private mortgage insurance, also known as PMI, is a type of insurance that covers the mortgagee (the lender) against losses resulting from a breach of the mortgagor's obligation to repay the loan.
PMI is usually an insurance policy required by the lender to be purchased by the borrower. This insurance is usually required when the borrower has a conventional loan with a down payment of less than 20% of the purchase price of the house. In other words, without this insurance, the borrower is usually required to make a 20% down payment, while with this insurance, the borrower may only be required to make a 10%, 5%, or less down payment.
[Last updated in April of 2022 by the Wex Definitions Team]