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There is often a bit of confusion for those seeking a new home purchase mortgage or refinance loan, relating to private mortgage insurance (PMI).  Some individuals think that PMI is really just homeowner’s insurance, while others think that it’s a protection for the homeowner in the event of a default on the loan.  One would think that these are valid assumptions because it is the homeowner that is paying for PMI, and it can be quite costly on a monthly basis.

In fact, private mortgage insurance does nothing to benefit the homeowner, except to qualify them home loans with loan-to-value ratios that are over 80 percent.  PMI is not homeowner’s insurance, it is actually a protection for the lender.  It protects the mortgage lender in the event that the borrower does not make their loan payments and the property has to be sold off as a foreclosure.