Hi everyone and welcome back to Money Girls Quick and Dirty Tips for a richer life.

I'm Laura Adams.

Private Mortgage Insurance, or PMI, is a special kind of insurance that lenders may require

you to purchase when you take out a mortgage.

It's certainly not the most exciting type of

insurance you'll ever buy because it doesn't insure you against anything. It only

ensures your lender. In this show we'll cover why you have to buy it and how to get rid of it as soon as you can.

Private mortgage insurance is just one of the expenses that normally go along with getting a loan to buy a home.

No one likes having an extra expense

tacked on to their monthly mortgage payment, but it's a requirement when your

loan to value ratio or LTV is 80% or more.

In other words, when you borrow more than 80% of the value of a property

you can expect to pay PMI.

This rule even applies to borrowers with squeaky clean credit.

For example, if you buy a house for $200,000 and make anything less than a 20% or $40,000 down payment,

your mortgage payment will be increased by a monthly PMI premium.

I'll tell you how much that could be in just a moment.

Once you pay the loan down to a certain balance, you have rights for getting rid of the

policy so you don't have to continue making

PMI payments forever. The reason lenders make you pay for PMI is because they

consider any loan with less than a 20% down payment somewhat risky.

So they require you to mitigate their risk by covering the cost of PMI on their behalf.

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