The Definition of Insurance

Mortgage Insurance is known as an alternative to a major advance, and also for a second ( "piggyback") mortgage on the loan amount exceeds 80% of property value. Knowing the cost of Mortgage Insurance used to determine which of these options cheaper to the borrower.

The best advice is to not borrow more than 80% of property value, so you can avoid buying a mutual insurance company.

It is a 4oz potato 'small' to you? Anyone can weigh a potato, but the judges of the "small" and "large" are the eyes of the eaters. It is similar to mortgage insurance.

Here are some examples to determine the cost of Mortgage Insurance

Since the measurement of the cost of mortgage insurance is harder than a potato weight, I will show you how. But the measure is only step one. Step two is to determine what it means for you, you need to do to you. But to help with this, I will see how to convert the mortgage insurance decision on an investment, with a greater number of people who are aware of.

Let us take a concrete example. Suppose that I can get a 15-year fixed rate mortgage of 7.5% and zero points to buy a house $ 100,000. Without mortgage insurance, I could borrow up to $80,000 (80% of property value), whereas with mortgage insurance, I could borrow up to $95,000 (95% of property value). The premium on the loan is $ 95,000, 79% of balance per year during the first 10 years, after which it drops to 20%.

The best way to measure the cost of insurance is to see loans of $95,000, consisting of 2 loans, one for $80,000, which has an interest rate of 7.5% were exclusively of the interest, and one for $15,000, which includes the cost both interest and insurance premiums. The interest cost of $15,000 loan is 12.7% if you stay at home up to 10 years decreases slowly after the 12% if you live fully in 15 years.

Since the premium is only 79% of the cost of the loan of $15,000 5.2% higher than the $80,000 loan? The reason is that when you borrow an additional $15,000, you pay the premium of $95,000.

To be continued at The Cost Factor of Mortgage Insurance

--- Source : www.mtgprofessor.com ---

Related articles:

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• Do I need Insurance?
• The Big part of Insurance