Figuring Mortgage Insurance Rates

Figuring Mortgage Insurance Rates

This is the kind of insurance policy that protects the lender from a borrower who defaults from making payments. A borrower may be a high risk borrower who does not have a good credit rating and lending to him means a high chance of losing all the money to nonpayment. For a long time, home buyers had to foot 50% of the value of the home as down payment before living in the house.

While this was good for the lenders, It meant that a very small percentage of people could comfortably own homes. In an effort to attract more borrowers and to get more people to own their own homes, the percentage of down payment has come down to 20% and those who are not able to reach the 20% are supposed to pay for insurance as well, so as to protect the lenders who go on a high-risk venture when lending to them. At the moment a borrower can pay single digit down payments on a home and still manage to get ownership of it. This insurance is paid for until the borrower gains 20% equity on the home.

To get the mortgage insurance rates, you will need the loan amount, the total loan amount you are being given. For an FHA loan you will need to know the insurance for the life of the loan, the one you pay upfront with the down payment. This amount is normally paid upfront or can be paid as part of the loan. This insurance is 1.75% of the value of the loan, so if you have been given a loan of $300,000, you will pay upfront insurance of $5250.

If you have decided that this insurance will be paid monthly, the loan amount is multiplied by 0.55% and then divided by 12 for the monthly payment. This is applicable to those loans that will be repaid in more 15 years.

In the above situation, it will be $305,250 multiplied by 0.55% and divided by 12, which will give you $139.9. This will be the amount that will be added to your monthly payment, plus other payments like taxes, homeowners and PMI. The rate of PMI will be influenced by the total percentage of the loan you have paid back to the lender. The more you pay, the less you should be paying as PMI. Always calculate your loan to value ratio and the moment it is less than 80%, get your lender to drop PMI. dbrownn


Long Ago...

David Lichtenstein did a research on the topic a long time ago, and I don't seem to remember the results and outcomes ...

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