Mortgage insurance rates may have triggered many questions among people who are planning to buy mortgage insurance. While the insurance is important, they have to obtain it lest they cannot purchase their dream properties.
However, wrong information and misunderstanding about this topic will only lead these people into rate pitfalls. That is why knowing a few details about the premium will be helpful.
Determining Factors
Mortgage insurance rates are varied to one loan provider to the other since each of them set up different rules on loans. However, there are several shared factors being used by those providers.
First, the amount of the loan. It is clear that the higher the loan, the more expensive the mortgage insurance rates will be. This is reasonable because this element will be used as the main calculation to estimate the rate. Second, credit histories of the borrowers, the better the history, the higher loan they can obtain later.
The total of down payment being made will also influence the amount of mortgage insurance rates. The borrower’s income, however, will also be used to determine the rates as well as the debt payment and other expenses. These elements have something to do with the ability of the borrower to pay the premium. Insurance companies do not want to take a risk by giving the loan in a blindfolded way, which potentially put them in a bigger risk.
FHA Standard
Federal Housing Authority (FHA) set higher mortgage insurance rates to be compared to any conventional providers. FHA charges a 0.5 percent of monthly payment while common mortgages’ rate may start from 0.3 percent. In addition, FHA also applies an additional 1.5 percent payment that must be submitted at the time of mortgage closing.
The fact that FHA’s rate increases this year means that the mortgage insurance will go up and make it even more expensive.
Paying the Rates
Several kinds of payment are made available for borrowers. Borrowers can pay the premium in one imbursement, or either to pay it monthly or annually. One time single premium excludes initial and renewal payments.
Annual premium is made by paying the mortgage insurance rates every month, but for yearly house payment. Unlike the annual payment, monthly premium requires the borrowers to pay the monthly rate instead of the whole year payment.
Cancelling and Refunding
As the mortgage insurance is expected when one pays less than 20 percent of the property’s value for the upfront payment, it can be cancelled when the respective person once exceeds this threshold.
Since the mortgage insurance rates are non refundable, there is no chance for the borrowers to obtain their money back. However, borrowers who make one-time payment are eligible for a certain amount of refund.