Private Mortgage Insurance

A type of insurance that a borrower might be required to purchase as a condition of a conventional mortgage loan. Most lenders require PMI when a homebuyer makes a down payment of less than 20% of the home's purchase price. Unlike most types of insurance, the policy protects the lender's investment in the home, not the individual purchasing the insurance (the borrower). PMI makes it possible for some people to become homeowners sooner, but it comes with additional monthly costs. Borrowers must pay their PMI until they have accumulated enough equity in the home that the lender no longer considers them high-risk.