15 year fixed rate
The answer is that because of how mortgage interest works, most of your payments in the early years goes to interest, not paying down your loan. On a 30-year loan of $100k at 7%, the payment is $665/mo., but when you make the first payment, a whopping $583 goes to interest, and a mere $82 goes towards owning the home. Last update: June 2013 (includes new FHA rules & rates). When your down payment is less than 20%, you usually have to pay for Mortgage Insurance, (PMI). This protects the lender in case you don't make your house payments, they repossess your house, and they have to sell it for less than the amount left on the loan. 1 Cost-Private mortgage insurance typically costs between 0.5% to 1% of the entire loan amount on an annual basis. 2  On a $100,000 loan this means the homeowner could be paying as much as $1,000 a year, or $83.33 per month-assuming a 1% PMI fee. In this article, we'll examine the six common problems with PMI and then explore a possible solution that allows homebuyers to avoid it altogether. Six Good Reasons to Avoid PMI. 1  Cost-Private mortgage insurance typically costs between 0.5% to 1% of the entire loan amount on an annual basis. Now on a 100,000 loan on a 15 year term at 90% LTV you might be required to have 12% coverage for your PMI (which would equal a PMI payment of $19.17 per month). Therefore, by using a 15 year term vs. a 30 year term you may be able to cut your PMI by less than half. Anytime you are over 80% LTV and you are required to pay PMI and you obtain a 15 year fixed rate mortgage, the percentage of coverage required for PMI is significantly lower than the percentage required for a 30 year mortgage. You'll be required to carry private mortgage insurance if you don't have enough cash to make a 20% down payment on a home. It costs anywhere from 0.20% to 1.50% of the balance on your loan each year, based on your credit score, down payment and loan term. The annual cost is divided into 12 monthly premiums and added to your monthly mortgage payment. Mortgage insurance protects the lender, not you Private mortgage insurance fees vary, depending on the size of the down payment and your credit score, from around 0.3 percent to about 1.5 percent of the original loan amount per year. Some years, PMI premiums are tax-deductible and some years they're not, depending upon the whim of Congress. PMI can be canceled. Your lender must automatically cancel PMI when your outstanding loan balance drops to 78 percent of the home's original value. This probably will take several years. You can speed up the cancellation of mortgage insurance by keeping track of your payments. For a couple with a $250,000 loan and a $2,500 annual PMI payment (1% of the outstanding loan), this deduction could translate into savings of $300 to $400 dollars or more (depending upon the couple's tax bracket). Also private mortgage insurance often can be paid up front. In this article, we'll examine the six common problems with PMI and then explore a possible solution that allows homebuyers to avoid it altogether. Six Good Reasons to Avoid PMI. 1  Cost-Private mortgage insurance typically costs between 0.5% to 1% of the entire loan amount on an annual basis. 2  On a $100,000 loan this means the homeowner could be paying as much as $1,000 a year, or $83.33 per month-assuming a 1% PMI fee
http://michaelbluejay.com/house/pmi.html http://www.investopedia.com/articles/pf/07/avoid_pmi.asp http://www.brokeroutpost.com/reference/25185.htm http://www.interest.com/mortgage/news/what-you-need-to-know-about-private-mortgage-insurance/ http://www.bankrate.com/finance/mortgages/the-basics-of-private-mortgage-insurance-pmi.aspx http://www.investopedia.com/articles/pf/07/avoid_pmi.asp
how many years of coverage is PMI