Lender Paid Mortgage Insurance

Now that mortgage rates have finally dipped, refinancing is on the minds of many. This is especially the case in this ailing economy. If a family can save $50 a month or more, they are taking a close look at the numbers to see what makes sense for them. We are happy to analyze this for you. Rates are awesome right now, but only by applying will you truly be able to see what is available to you. Each person's scenario is different. We all have different credit scores, equity positions, etc. The rates you hear advertised are "best case scenario". Once the lender sees your credit score and LTV they will institute the appropriate pricing hits for your loan. This could take 5.375% and make it 5.675%! After running the numbers we can calculate your savings and weigh this versus the cost to refinance. Lastly we will look at how long you plan on staying in your home. Our goal is to leave no stone un-turned! The title of this post is Lender Paid Mortgage Insurance for this reason. This may be the best option for you. Instead of you paying a monthly mortgage insurance premium that can be painful, you elect a higher interest rate and the lender pays it for you. You of course are paying for it with higher monthly interest, but you get the point. The big difference is shown in your monthly payment. In many cases your payment is lower with Lender Paid MI instead of taking the lower rate and then tacking on the higher monthly MI premiums of today's lending environment! I just worked on 2 scenario's yesterday where Lender Paid was the way to go.

Scenario 1 - The couple bought a home using the once popular 80/20 option to avoid MI. Now they want a lower rate and they qualify. The problem is that even though they can drop from 6.625% to 5.5%, their payment doesn't drop a ton due to their smaller loan balance. Then add in the monthly MI they are paying, and WHAM! Their monthly payment would be higher! By electing TAMI, they take a higher rate .50-.75 higher but no monthly MI. This option provided more monthly savings.

Scenario 2 - A client bought a home in Kansas City under the now defunct 100% program. He will be at a high LTV (95%), but he can drop his rate to 5.5%. The problem is that his MI at the time of the purchase was $82 per month. Under new MI rates he is looking at $130 per month. This is due to the high LTV and the increased risk in the MI business. So even if he elected to stay with borrower paid MI his monthly payment would go up or stay the same after it offsets the monthly savings obtained from the lower rate. With Lender Paid he came out with a larger monthly savings.

Now if you absolutely will be in the home for the life of the loan or close to it, then monthly savings is not the only item to look at. During this long time period you can benefit from the lower rate over time and you come out ahead. The problem is that this is a rarity in todays world. People just don't stay in their homes very long. Especially in a community like Columbia that lends itself to lots of turnover.

While I realize it is tough to see 5.5% and end up taking a Lender Paid rate of 6.25% for example, just step back and analyze it. It may be the right choice for you!

Brought to you by:
Professional Mortgage Group, Inc.