Mr Murray, a question about something you posted...

[Stormy]

In another post you said--

"Do not finance 3 or 5 years of homeowners insurance for 30 years (very bad financial step)..shop the price of insurance like you would any item..."

So that means it isn't required to be in the cost of the mortgage??? And it's a bad idea to include it in the mortgage??

We are pre-approved for a $110,000 mortgage at 6% interest.
The payment break down is:

$649.32 Principal & interest
$272.32 Insurance
$ 41.80 Taxes
$ 44.06 This charge had some intials that I forgot to write down, I think it was PMI
_______
$1007.50 per month

Isn't that insurance on the high side?? The guy told me insurance HAD to be included in the loan.

We are checking with two other companys, and will also check with PH to see if we can get a lower payment and/or interest rate.

Thank you

[Mac]

They are trying to make you finance years of insurance; that's way too high for one year. PMI does nothing to help you, it benefits the lender. It is generally required as a condition of the loan if your equity is less than 20% - you are borrowing more than 80% of the value of the property. It will automatically discontinue when the loan-to-value (the 80% example here) gets to 78%, or, if the value of your property increases, and an appraisal proves it, you can request that it be dropped when the LTV drops to 80%.

You are required to have insurance sufficient to pay off the mortgage, with the mortgage company listed as beneficiary. But you can buy that elsewhere if desired, or just insist on ONE year prepaid.

It is not a bad idea to have your taxes and insurance included in your payment unless you are expert at managing your money, so you can come up with the annual tax and insurance payments all at once. If your loan is 80% or higher, you may be required to have these items built in.

Insurance, out where I live - some distance from a fire station - costs us $600 a year. You are paying $3268 - so I would imagine FIVE years worth. Bad deal.

[rmurray]

You are being shown a required escrow for future insurance...This is much different than adding multiple years of insurance into the principle and financing this amount (and paying interest) for 30 years...

Your sales person is correct that you will have to escrow for future insurance and it is probably required by the lender...BUT..the lender does not dictate who you buy the insurance from...It is implied here that the insurance costs $3270/year....seems WAY high...Of course insurance rates vary by location and some particularly vunerable areas might be this high...but you can shop around with all insurers in your area and chose the insurance that you want...You are in NO WAY required to buy the insurance from the dealer...

[Threnody]

My insurance is $620 a year. I'm trying to get the hazard knocked off because I already pay for homeowners.

[jgn]

What affects insurance rates the most is the fire department, how far and full time. We have a lake DW that is out in the boonies, covered by a volunteer FD and out rate is 11.26 per thousand and My primary home is wood shake roof, getting impossible to insure, and it cost 5.92 per thousand because of the full time FD. Your rate comes out to 29.72 per thousand which seems very high. If you have less than 50% equity, most lenders make you escrow the money for taxes and insurance. This is not part of your mortgage but a savings account that the lender keeps to pay the bills when the are due. This is a fluid account that changes every year as taxes and insurance rates change, have never seen them go down. Some insurance companies will not insure a MH but a lot of them will so shop around.