Question about PMI for 20 year loans.

It's based on your Loan to Value (LTV) and your credit score as well as the term.. So 95% LTV 20 Yr vs. 30 Yr is 25% to 30%, or a 5% reduction. But for 85% LTV it's 12% to 6%.. The reason for the discrepancy is because of how soon you will be paying down your principal balance.. on a $200K loan at 4.5% X 30 Years, from your first payment, your only paying $265 towards principal, however the same scenario, but 20 year financing, your paying nearly $520 in principal from the first payment.. because your paying more towards your principal from the very beginning, your loan becomes inherently has less risk involved than a 30 year, so the MI coverage is less.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. William J. Acres, Lender411's number ONE lender in Arizona. 480-287-5714 WilliamAcres.com

Great answer from William; there are many variations based on the term of the loan (10, 15, 20, 25 or 30 years); the type of loan (ARM or fixed); certain special features; credit score; etc. Remember this is INSURANCE, so it's all about risk. Don't get hung up on the PMI cost, it is a necessary part of many transactions just like taxes and property insurance. If you are comfortable with a higher payment for a shorter term loan, or mort than the minimum cash to work with, or can negotiate for more help from the seller (within guidelines) there are ways to reduce or eliminate the MONTHLY cost of the PMI or possibly eliminate it entirely. A good mortgage lender will look at your overall qualifications and suggest the best options for your circumstances.