Mortgage Insurance Quote

Many new homeowners are not aware of the basics of mortgage insurance. Other types of insurance are made to protect you or your property, but mortgage insurance is made to protect the lender who gave you the loan for your home. Mortgage insurance is also known as lenders mortgage insurance (LMI) or private mortgage insurance (PMI). PMI premiums typically go into a securities or investment fund that pays a lender the balance of any losses should your home have to be foreclosed upon. In many circumstances, a home loan may not be available without the borrower accepting a PMI policy. This is the case when the borrower cannot put up a down payment of 20 percent or greater of the total value of the home. Mortgage insurance must be continued until equity is built in the home to an 80 percent loan-to-value ratio (LTV).

Mortgage insurance quotes are often not obtained by new homeowners. Most buyers allow their lender to handle the specifics of the PMI. Of course, homeowners can go to any insurance company they would like, but most people are so busy and excited about their new home, they let the lender take care of it. In many cases, the first year’s PMI premiums are added to the amount of the loan. Then, the homeowner will continue to make a monthly PMI premium payment that is included with their mortgage payment in order to build up the amount required for the next year’s premium.

Some lenders, however, have begun to address PMI payments differently. They spread they mortgage insurance payment s out over the lifetime of the mortgage. A typical monthly premium payment for a home bought with a 5% down payment is 0.78% of the total mortgage amount divided by 12. On a home where a 10% down payment was made, the PMI premium will be about 0.52%/12. After the first 20 years on a 30-year fixed rate loan, this amount is significantly reduced for the last 10 years.

Once you are unpacked, settled down, and ready to continue on with your regular life, it may be of benefit to get a new mortgage insurance quote, especially if it has been a year since you bought your home. The mortgage insurance quotes you receive are based on only a few factors: the current value of your home and the amount you have paid on your mortgage. Unlike other forms of insurance, personal risk is not a factor in the amount of the premiums. This means your personal credit report has no bearing on the mortgage insurance quote. Different companies, however, use slightly different formulas and different percentages in determining monthly rates. With a little legwork, a lower PMI premium can be found.

Because most of the initial payments on a mortgage go to finance charges, it can still take 10 to 15 years to cover the 80% loan-to-value ratio. If it has been around 10 years, a new mortgage insurance quote may not be necessary because you may no longer be required to carry PMI on your mortgage. If home values are rising in your neighborhood, it may take even less time to reach an 80% LTV. This is also true if you have added value to the home through remodeling or have been paying down your mortgage beyond the requirements of your monthly payment. To determine if a mortgage insurance quote is not necessary, you first must get a new appraisal on your home. The new appraisal is then sent to your lender who is required to reevaluate your situation as per the Homeowner’s Protection Act of 1998.