Mortage Insurance Premium

A first mortgage premium is paid at the time of closing and also depending on the type of premium plan that is chosen a monthly amount might be expected in the house payment that is made to the lender. The lender then remits payment to the mortgage insurer. MGIC provides flexible premium plans for borrower"s.

There are different types of premium plans: Annuals are where the borrower needs to pay the first year premium at the time of closure. An annual renewal premium is then paid monthly included in the complete monthly house payment.

Monthly premiums involve the cost of a slightly more traditional mortgage insurance plan. However monthly premiums reduce the cost of mortgage insurance closing payments dramatically. Borrower"s pay a mortgage insurance as part of the house payment they pay monthly. Borrower"s also only have to pay one month"s mortgage insurance premium at the time of closing, instead of one year`s.
Singles is where the borrower pays a one time single premium rather than an initial premium or renewal premiums. As single premiums are more often financed as an element of the mortgage loan charge, there is no  out-of-pocket charge added on to the mortgage insurance at the time of closing.

Premiums are yearly rates that are paid monthly. As part of Federal law, premiums are ended automatically when the loan amount falls below 78% of the original cost of the home. Premiums might be terminated sooner dependant on the borrower"s initiative when the loan amount reaches 80% of its appreciated value.

In more recent years insurers have been valuing loans that they would not have done previously. This has resulted in premiums that cover a more wider range. Premiums tend to be higher on investment and vacation homes, manufactured buildings and cash-out refinances. Also with down payments of lower than 3% premiums can vary depending on the persons credit score.

One of the best ways of estimating the cost of the insurance premium is to look at the loan of $95,000 as consisting of two loans: One for $80,000 with an interest cost at 7.5% that consists of just the interest rate; and the other one for $15,000 which consists of the interest rate and the insurance premium. The interest charge on the $15,000 loan works out at 12.7% providing you live in your home for at least up to 10 years, declining slowly afterwards to 12% as long as you remain in your property for 15 years. As the insurance premium works out at only 7.9% how can the cost of the $15,000 loan work out more than the cost of the $80,000 loan The answer is that as long as you are borrowing an extra $15,000, you have to make the payment of the premium on the complete $95,000.