It is hard to argue that buying a new home is an expensive endeavor. The price of the home may be high to begin with, and paying interest for your mortgage along with the lending fees and closing fees can put many people over their head in expenses.

Since the entire process is so expensive, many people opt to make low down payments and obtain mortgage insurance. Mortgage insurance is purchased by you, the homebuyer, but is used to cover the lender in the case that you do not reimburse the lender for the portion of the down payment that they lent you.

The mortgage insurance premium is calculated by the loan-to-value ratio, the amount of the loan in comparison to the actual price of the home, the loan amount and type of loan, as well as, the amount required by the lender for the remainder of the down payment.

Usually you can pay the mortgage insurance premium incrementally through monthly payments, but you most likely will be required to pay one or two months of the premium upfront at closing. Remember, you will be required to repay the lender for the portion of the down payment lent, as well as, the cost outlaid for mortgage insurance.

If you have private mortgage insurance you may be able to cancel it once your loan balance is reduced to below 75 or 80 percent of the property value. Federal legislation now says that mortgage insurance must be terminated if the loan balance is under 78 percent of the home’s value.

If you are unsure of when your mortgage insurance can or should be cancelled, contact your loan advisor. At GreenPoint Mortgage, loan advisors are available seven days a week to assist you with questions such as this and any of your other home finance concerns.