Definition of "Mortgage Insurance"

There are actually two types of mortgage insurance. Usually, people mean private mortgage insurance, or PMI, which protects a mortgage company against a defaulted loan. PMI does not benefit the homeowner. If you bought your home with a down payment of less than 20 percent of its value, your bank probably made you take out PMI. At some point, you won’t have to pay for PMI any more, but don’t expect the bank to let you know when that is. Mortgage insurance can also mean a type of life insurance, which pays off the balance of a mortgage when the policyholder dies or, in some cases, becomes disabled. As a homeowner, you want to get rid of the first type as soon as you can. You might want to consider the second type.