How much does private mortgage insurance cost?
The cost of Private Mortgage Insurance is based on several factors. The first item is what is called the mortgage coverage that the lender will be looking for on an individual loan. The second item that determines the cost of MI is your credit score. The last item that determines the cost is how much of a down payment are you putting down. The more money you put down, the cheaper the mortgage insurance. The cost of MI varies from .32% to 1.09% of the loan amount. Please note that if your credit is not at a determined level, you may be paying a higher MI rate. Normally, PMI may be stopped when you reduce the principal of your loan to 80%. PMI also applies for refinancing. Mortgage insurance can be very expensive and there is no tax deductible benefit for you on the mortgage insurance payments, so be sure to ask your lender how to have the PMI removed once you build up enough equity.
In general, PMI costs about one-half of one percent of the total of the home loan. So, for instance, if you wish to buy a home for $500,000, and you make no down payments, then your PMI will cost $2,500 a year, or an extra $208.33 a month. Bear in mind the fact that this is a very general idea, which might differ; as a rule you must make some down payment in order to buy a home.
PMI premium payments vary based on the size of the down payment, the type of mortgage, and the amount of insurance coverage. The charges typically amount to 0.5 percent to 1 percent of the loan annually. Generally speaking, the PMI premium for a median priced home is likely to fall between $50 and $100 a month. Shopping around for a lower rate isn’t an option since the lender chooses the policy. The premium is usually incorporated into the monthly mortgage payment. WHEN CAN I STOP PAYING PMI? Under the federal Homeowners’ Protection Act (HPA) of 1998, on loans made on or after July 29, 1999, lenders must provide borrowers with certain disclosures concerning PMI. The Act includes provisions for the automatic termination of PMI and the borrower’s right to request PMI cancellation. Prior to the Act, some homeowners paid premiums for years after they had reached 20 percent equity in their homes. HOW DOES AUTOMATIC TERMINATION OF PMI WORK? Under the Homeowners’ Protection Act, for loans clo
The cost of PMI is divided into two parts. The first part is a payment made at the time of closing. The second is an on-going monthly payment made with your principal and interest payment. Normally, PMI may be stopped when you reduce the principal of your loan to 80%. PMI also applies for refinancing. Mortgage insurance can be very expensive and there is no tax deductible benefit for you on the mortgage insurance payments, so be sure to ask your lender how to have the PMI removed once you build up enough equity. You will probably have to pay for an appraisal on your home to prove your equity is high enough, but that will be money well spent if it eliminates high PMI payments. You can avoid PMI altogether by placing a down payment of 20% or higher on your home purchase. Or, if you are refinancing, you can avoid PMI by leaving 20% equity in your house.
The cost of PMI is divided in two parts. The first part is a payment made at the time of closing. The second is a payment made each month with your principal and interest payment. Your actual dollar cost will be based on many variables including the amount of your down payment, type of property and term of mortgage. Some lenders also offer reduced rates for those that receive an approval through automated underwriting systems. However, to be sure about the exact cost you should contact a mortgage professional anytime you are putting less than 20% down. To find one in your area please click on the graphic below.
