Can Mortgage Insurance Premiums Rise?

Question: My private mortgage insurance payment jumped from $49 to $258 a month. How can they increase my rate?

Answer: Something plainly increased on your monthly statement, but it was probably not the cost of private mortgage insurance (MI).

Mortgage insurance is required for FHA loans and VA mortgages. For conventional loans, private mortgage insurance is required when borrowers purchase with less than 20 percent down.

Rates for MI are established at the time a loan is created. Depending on your MI plan, there may be an up-front cost plus a monthly expense thereafter. The actual monthly cost will depend on such factors as whether you’re financing with a fixed-rate or adjustable loan and the amount you originally put down — in other words, rates are lower with 15 percent down rather than 5 percent.

Since the monthly MI expense is a percentage of the outstanding loan balance – and since the outstanding loan balance declines each month with most loans – your monthly MI costs should also decline.

There have been strange and unusual loans where your MI costs could actually rise. For instance, imagine if your have a mortgage which allows negative amortization. If your monthly payments do not cover the interest cost the unpaid interest is added to the debt. The loan balance increases and so would the cost of mortgage insurance.

There could be a mistake. Or, if you have a home equity line-of-credit perhaps the balance has increased. Or, a charge for one item, say a rise in property taxes, has been incorrectly assigned.

Pay your loan bill in full. Also, send a certified letter to your lender with a return receipt requested. Include your account number and a copy of the bill. Ask for an explanation — or a correction. The lender generally has 30 days from the receipt of your letter to respond.


Syndicated originally to newspapers nationwide by Content That Works and re-posted with permission.

Technorati Tags: , , , , , , , , , , , ,

Posted in: News

Post a Comment