How does PMI compare to other parts of my Loan Offer?
1. Interest Rate: It is one of the most significant factors affecting the monthly mortgage payments and the overall cost of the loan taken. A lower interest rate results in lower monthly payments and carries less interest payment over the life of the loan. Interest rate affects the loan amount.
2. Down Payment Requirements: The down payment is the cash payment a borrower makes toward the purchase price. A higher down payment will lead to a smaller amount of loan and may help in avoiding PMI or qualifying for a lower PMI rate. It is necessary to balance down payment with other financial considerations.
3. Loan Term: The loan term means the length of time over which the borrower will repay the loan. If the time of the loan repayment is short, then it usually results in higher monthly payments but less interest rate. A person should consider how different loan terms impact his budget and financial goals.
4. Tax: A person should take advice from the tax consultant regarding the benefits a taxpayer can gain from the interest payment of a loan. He should be aware of whether paying more in interest or paying PMI might affect his taxes differently.
5. Prepayment Penalties: Some mortgage loans may include prepayment penalties if you pay off the loan early or make extra payments toward the principal. Borrowers should be aware of any prepayment penalties associated with the loan and how they may affect the ability to refinance the loan.