The cost of PMI is based on the LTV. A 95 percent loan costs more than an 85 percent loan. The premium is charged monthly and added to your payment, along with taxes and homeowners insurance. Typically, the PMI premium costs .75 to .92 percent, with 5 percent down payment. A 10 percent down payment drops the PMI to .50 to .68 percent. The exact percent you pay depends on your credit score.
For example, when Isadoro and Maria bought a $129,000 home, they put 5 percent or $6,450 down. At 6.25 percent interest, their monthly payment was $754.56. Since their loan was a 95 percent LTV, the lender charged them a .092 PMI fee. This translates into $754.56 _ .092, which equals $69.42 added to their monthly payment.
If Isadoro and Maria had put 10 percent down, the PMI factor would have dropped to 0.068 or $51.31 a month. Of course, if they could have come up with 20 percent down, there would have been no PMI.
The bottom line is that PMI is an insurance policy separate from your mortgage.
When you’re shopping for a lender and comparing costs, don’t forget to compare PMI fees. They are negotiable because PMI companies are usually separate entities, and they’re competitive. Mortgage insurance is an important part of the home buying process. It gives you an opportunity to buy a home without saving up a big down payment. If the alternative is renting for years while saving for a down payment, it’s a great bargain, because in those years you can be paying off a mortgage instead of paying a landlord.
For example, when Isadoro and Maria bought a $129,000 home, they put 5 percent or $6,450 down. At 6.25 percent interest, their monthly payment was $754.56. Since their loan was a 95 percent LTV, the lender charged them a .092 PMI fee. This translates into $754.56 _ .092, which equals $69.42 added to their monthly payment.
If Isadoro and Maria had put 10 percent down, the PMI factor would have dropped to 0.068 or $51.31 a month. Of course, if they could have come up with 20 percent down, there would have been no PMI.
The bottom line is that PMI is an insurance policy separate from your mortgage.
When you’re shopping for a lender and comparing costs, don’t forget to compare PMI fees. They are negotiable because PMI companies are usually separate entities, and they’re competitive. Mortgage insurance is an important part of the home buying process. It gives you an opportunity to buy a home without saving up a big down payment. If the alternative is renting for years while saving for a down payment, it’s a great bargain, because in those years you can be paying off a mortgage instead of paying a landlord.
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