System and method for reducing mortgage interest rate and mortgage guaranty insurance premiums associated with a mortgage loan
First Claim
Patent Images
1. A method for reducing at least one of insurance rates and insurance premiums associated with a financial product, comprising the steps of:
- determining an original loan-to-value (LTV) ratio of a financial product, said financial product having an amount and an interest rate associated therewith, wherein said financial product necessitates a purchase of insurance for said financial product when said original LTV ratio exceeds a first pre-determined level, and wherein a first insurance premium would be charged for said insurance if said first insurance premium were based on said original LTV ratio;
adding a cost of a buydown to the amount of said financial product, wherein said interest rate of said financial product is reduced as a result of said buydown;
achieving a gross LTV ratio that is increased from said original LTV ratio as a result of adding the cost of said buydown to the amount of said financial product, wherein, when said gross LTV ratio exceeds a second pre-determined level as a result of the added cost of said buydown, the first insurance premium charged would be increased to a second insurance premium higher than the first insurance premium and corresponding to said gross LTV ratio if said gross LTV ratio were used to determine the insurance premium that should be charged for said insurance; and
offering said insurance for the first insurance premium based on said original LTV ratio rather than on said gross LTV ratio, thereby effectively reducing the insurance premium charged for said insurance from the second insurance premium to the first insurance premium, wherein the first insurance premium at which said insurance is offered is determined through usage of a computer.
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Abstract
In the present invention, a system and method is described for reducing the mortgage interest rate and mortgage guaranty insurance premium associated with a mortgage loan by financing discount points into the mortgage loan at origination. In addition, the mortgage guaranty insurance premium is determined based on the original loan-to-value (LTV) percent, independent of the amount of discount points financed into the original loan.
51 Citations
27 Claims
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1. A method for reducing at least one of insurance rates and insurance premiums associated with a financial product, comprising the steps of:
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determining an original loan-to-value (LTV) ratio of a financial product, said financial product having an amount and an interest rate associated therewith, wherein said financial product necessitates a purchase of insurance for said financial product when said original LTV ratio exceeds a first pre-determined level, and wherein a first insurance premium would be charged for said insurance if said first insurance premium were based on said original LTV ratio;
adding a cost of a buydown to the amount of said financial product, wherein said interest rate of said financial product is reduced as a result of said buydown;
achieving a gross LTV ratio that is increased from said original LTV ratio as a result of adding the cost of said buydown to the amount of said financial product, wherein, when said gross LTV ratio exceeds a second pre-determined level as a result of the added cost of said buydown, the first insurance premium charged would be increased to a second insurance premium higher than the first insurance premium and corresponding to said gross LTV ratio if said gross LTV ratio were used to determine the insurance premium that should be charged for said insurance; and
offering said insurance for the first insurance premium based on said original LTV ratio rather than on said gross LTV ratio, thereby effectively reducing the insurance premium charged for said insurance from the second insurance premium to the first insurance premium, wherein the first insurance premium at which said insurance is offered is determined through usage of a computer. - View Dependent Claims (2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16)
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17. A method for reducing a mortgage guaranty insurance premium associated with a loan, the method comprising the steps of:
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determining an original loan-to-value (LTV) ratio of a loan, wherein said loan is one of a mortgage loan and a piggy-back loan and has an amount and an interest rate associated therewith, and wherein said original LTV ratio is the ratio of the amount of said loan to a value of an associated property, wherein said loan necessitates a purchase of insurance when said original LTV ratio exceeds a first pre-determined level, and wherein a first insurance premium would be charged for said insurance if said first insurance premium were based on said original LTV ratio;
adding a cost of at least one discount point to the amount of said loan, wherein said interest rate of said financial product is reduced as a result of the added cost of the at least one discount point;
achieving a gross LTV ratio of said loan, which is the ratio of the added cost of said at least one discount paint and the amount of said loan to said value of said associated property, as a result of adding said cost to the amount of said loan, wherein, when said gross LTV ratio exceeds at least a second pre-determined level above said original LTV ratio by the added cost of the at least one discount point as a result of the added cost of said buydown, the first insurance premium charged would be increased to a second insurance premium higher than the first insurance premium and corresponding to said gross LTV ratio if said gross LTV ratio were used to determine the insurance premium that should be charged for said insurance; and
offering said insurance for the first insurance premium based on said original LTV ratio rather than on said gross LTV ratio, wherein the first insurance premium at which said insurance is offered is determined through usage of a computer. - View Dependent Claims (18, 19, 20, 21, 22, 23, 24, 25, 26, 27)
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Specification