What is PMI?

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, it is required on first mortgage refinance transactions when the borrower has less than 20% equity in the property being refinanced. The cost of the mortgage insurance is typically added to the monthly mortgage payment.