[pastor1189]

Church member asked me. What is the true interest rate on a mortgage. When you have pay PMI insurance. They didn't put enough money down. Is it truly 5% mortgage. Or must you factor in the PMI payment to get the true interest rate.

I guess you need to know how long will you be paying that PMI insurance

[smoothy]

Your interest rate... is the interest rate... PMI insuranceis separate and is insurance to the lender they aren't going to lose money if you walk away before you have paid enough to where you have at least 20% equity in the property because its those people who are more likely to walk away from a loan.

[pastor1189]

Oh I see how it works Thanks

[smoothy]

Oh I see how it works Thanks

Eventually you can get the PMI cancelled once you pay down the mortgage enough... but your interest rate is uneffected by that... it will remain at the contracted rate (I'm assuming this is a fixed rate... not an adjustible)

Of course the rates right now are much lower but with that little equity... odds that any bank will refinance it are slim.

You have to keep an eye on it however... because there isn't any automatic trigger where it would stop on its own. You have to request it once you can demonstrate there is 20+% equity to their satisfaction. At least that's how it worked when I bought my house... ( I found ways to buy it down that 20%)

[pastor1189]

Very Good