PMI. Mortgage insurance provided by nongovernment insurers that protects a lender against loss if the borrower defaults. Many lenders require a a borrower to purchase private mortgage insurance if the loan they are taking out is 80% or higher of the value of the real estate. In most cases, once the borrower has paid back enough of the loan so that it is less than 80% of the value, the borrow is no longer required to purchase this insurance. Private mortgage insurance has benefits for both borrower and lender; the lender is now protected against default, and the borrower is able to secure a loan with a smaller down payment. also called lender's mortgage insurance.