January 23, 2009, Newsletter Issue #152: What Determines a Private Mortgage Insurance Rate
Tip of the Week
When lenders calculate a private mortgage insurance rate, there are two main factors that come into their calculations; loan type and down payment. PMI rates and rate charts will vary from lender to lender, but these two factors are always what they will use to calculate their fees for your loan. The loan type is an important factor in determining the private mortgage insurance rate because you will be making different payment and building different equity based on how many years you have to repay the loan.
The differences are vast between PMI on a 10 year and PMI on a 30 year loan. Your available down payment is also important to the calculation of the private mortgage insurance rate because it will tell the lender exactly what loan to value ratio they will be lending on. The higher the loan to value ratio, the higher the risk for the lender. Therefore, the more you borrow percentage wise, the higher the private mortgage insurance rate will be. Speak with a mortgage specialist about how to calculate your private mortgage insurance rate and use their information to make the smartest choice about how to borrow for your home purchase.
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