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Hi, my name is Ethan Ewing, and I am the president of Bills.com. Today I want to talk to you
about a very common mortgage term, PMI or Private Mortgage Insurance. For anybody that’s
going to buy a house and is putting less than 20% down as a down payment you are going to
be required to pay PMI, it just comes across just as a monthly premium, you pay it each
and every month, it usually goes into your mortgage payments. What PMI does is there
is no benefit to you as a borrower, even though you are paying it, it’s a benefit to the
lender, the bank, the servicer, whoever owns you a loan, in the event that you default.
The reasoning behind it is in situations where a borrower or a buyer is coming and not bring
a lot of money, not investing a lot of money in that house, the bank wants to make sure
they are going to be covered in the event that you default. So, keep in mind, once you
get to that 80% level, it’s really once you get to 78%, so you have built up some
equity in your house over time then the bank is forced or required by the government to
drop that coverage and they will send you a notice saying that you don’t need to make
this payment anymore. Hope that helps and we will see you next time.