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How to calculate mortgage insurance payment


how to calculate mortgage insurance payment

Use this mortgage calculator to estimate how much house you can afford. See your total mortgage payment including taxes, insurance, and PMI. Enter your down payment amount and the length of time for your mortgage repayment to calculate the costs of your insurance premium. Asking Price. $. Downpayment. Use this calculator to determine your monthly mortgage principal, interest, taxes and insurance payment (PITI) and amortization schedule.
how to calculate mortgage insurance payment

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How to calculate mortgage insurance payment -

How Is Private Mortgage Insurance Calculated?

Home buyers calculating pmiIf you're obtaining a conventional loan and borrowing more than 80 percent of the value of the property (i.e. 5%, 10%, 15% down payment) , the lender will require mortgage insurance. The mortgage insurance gives the lender a cushion between the loan amount and the resale of the home in the event of a foreclosure. In other words, if the down payment is only 5%, and the home goes into foreclosure, the lender only has 5% equity. If the house sells for less than 95%, the lender loses money. If however, the down payment was 20%, the lender can sell the home for 20% less and still break even. Mortgage insurance fills the gap between a low down payment and 20% of the property value.

The private mortgage insurance calculation depends on a number of variables, including

  • mortgage insurance plan,
  • loan amount and term,
  • market value of the home,
  • credit score,
  • coverage,
  • premium adjustments,

Monthly private mortgage insurance

The most common pmi plan is the borrower paid monthly pmi premium. The following pmi chart illustrates the calculation variables for the borrower paid pmi cost.

fixed-rate 30-YEAR
BASE LTV COVERAGELOAN'S REPRESENTATIVE CREDIT SCORE
  760+720-759680-719620-679
97% to 95.01%35%1.05%1.10%1.31%1.48%
30%90%94%1.14%1.31%
25%73%77%96%1.11%
18%57%60%80%94%
 
95% to 90.01%35%63%71%101%132%
30%54%62%89%115%
25%50%57%79%103%
18%45%51%69%80%
16%43%49%67%74%
 
90% to 85.01%30%49%54%64%83%
25%39%44%57%71%
17%33%38%44%56%
12%29%34%39%47%
 
85% and UNDER25%37%39%43%64%
17%30%32%38%53%
12%23%27%33%39%
6%21%25%29%33%


Along the left side of the chart is the loan to value. Loan is value is a simple calculation that determines the equity (or down payment) in the home. The calculation is simple for a purchase. Simply subtract the down payment number from 100 and you have the loan to value. For example, with a 5% down payment, 100 - 5 = 95%. For a 10% down payment, 100 - 10 = 90%. Another way to determine the loan to value is to divide the loan amount by the sales price (or appraised value). For example, if the sales price (or appraised value) is $100,000 and the mortgage amount is $95,000, the loan to value is 95% ($95,000/$100,000 = 95%)

Next, find the coverage line. Mortgage insurance coverage is the amount the mortgage insurance company will pay the lender in the event of a default on the loan. The payment is based on the outstanding balance multiplied by the coverage amount. For example, if the loan balance was $100,000 and the coverage was 30%, the mortgage insurance company would pay the lender $30,000.

35%, 30%, 25%, 18% or 16% are coverage options with a loan to value of 95% to 90.01%. As you can see, the monthly premium decreases as the coverage amount decreases. The typical coverage amount is highlighted.

After determining the loan to value and the coverage amount, you have to find the pmi percentage that intersects with the credit score along the top of the chart. Using the above example, a loan to value of 95% with 30% coverage and a credit score of 720 to 759 results in a monthly premium percentage of .62%.

Monthly PMI calculation

Now that you found the monthly pmi premium, you need to calculate the monthly cost. Staying with the previous example, the loan amount was $95,000 and the credit score is 720.

Loan amount95,000
X0.62%
Annual Cost589.00
Divide by 12 months = Monthly Cost49.08

Annual mortgage insurance premium

Another mortgage insurance option is the borrower paid annual premium is paid once a year (every 12 months).

Single premium mortgage insurance

This mortgage insurance plan pays the entire cost of the mortgage insurance in one lump sum at settlement. The up front cost is considerably higher than the other mi plans, however, this plan completely eliminates the cost of the mortgage insurance over the life of the mortgage. Borrowers can pay the entire sum at closing or finance the premium into the loan amount. A third party, such as a builder or a seller, can otherwise pay the premium

fixed-rate 30-YEAR - REFUNDABLE
For loans with level payments for the first 5 years
 
BASE LTV COVERAGELOAN'S REPRESENTATIVE CREDIT SCORE
  760+720-759680-719620-679
97% to 95.01%35%3.89%4.22%5.28%N/A
30%3.50%3.84%4.80%N/A
25%3.12%3.41%4.18%N/A
18%2.59%2.83%3.70%N/A
 
95% to 90.01%35%3.26%3.65%5.09%6.58%
30%2.83%3.22%4.51%5.76%
25%2.64%2.98%4.03%5.18%
18%2.40%2.69%3.55%4.08%
16%2.30%2.59%3.46%3.79%
 
90% to 85.01%30%2.59%2.83%3.31%4.22%
25%2.11%2.35%2.98%3.65%
17%1.82%2.06%2.35%2.93%
12%1.63%1.87%2.11%2.50%
 
85% and UNDER25%2.02%2.11%2.3%3.31%
17%1.68%1.78%2.06%2.78%
12%1.34%1.54%1.82%2.11%
6%1.25%1.44%1.63%1.82%

The single premium plan is expensive, however, the cost can be paid by the seller or financed with the mortgage or even paid by the lender

Loan amount95,000
X3.22%
Total Cost$3,059

The single premium plan is offered as "refundable" or non-refundable. The refundable plan means that if the mortgage is paid off within the 30-year term. A prorated refund will be paid to the borrower. The non-refundable premium is less expensive, however, no refund will be paid if the loan is closed out. "For loans with level payments for the first 5 years" means fixed-rate loans or adjustable-rate mortgages that have a fixed (same) interest rate for the first 5 years (60 months).

Split premium mortgage insurance

This mi program is a blend between the Single Premium plan and the monthly plan. There is a modest upfront charge and a reduced monthly premium. As with the Single Premium, the borrower is permitted to finance the upfront premium, or a third party can pay it. The monthly premium decreases as the upfront payment increases.

fixed-rate 30-YEAR - NON-REFUNDABLE - For loans with level payments for the first 5 years
 UPFRONT .75%UPFRONT 1.00%UPFRONT 1.25%
BASE LTV COVERAGELOAN'S REPRESENTATIVE CREDIT SCORE
 720+680-719620-679720+680-719620-679720+680-719620-679
 
ANNUALIZED MONTHLY PREMIUM RATES
97% to 95.01%35%0.68%0.90%1.33%0.61%0.83%1.26%0.55%0.77%1.20%
30%0.60%0.80%1.15%0.53%0.73%1.08%0.47%0.67%1.02%
25%0.51%0.67%0.94%0.44%0.6%0.87%0.38%0.54%0.81%
18%0.39%0.57%0.7%0.32%0.5%0.63%0.26%0.44%0.57%
 
95% to 90.01%35%0.56%0.86%1.17%0.49%0.79%1.1%0.43%0.73%1.04%
30%0.47%0.74%1.00%0.40%0.67%0.93%0.34%0.61%0.87%
25%0.42%0.64%0.88%0.35%0.57%0.81%0.29%0.51%0.75%
18%0.36%0.54%0.65%0.29%0.47%0.58%0.23%0.41%0.52%
16%0.34%0.52%0.59%0.27%0.45%0.52%0.21%0.39%0.46%
 
90% to 85.01%30%0.39%0.49%0.68%0.32%0.42%0.61%0.26%0.36%0.55%
25%0.29%0.42%0.56%0.22%0.35%0.49%0.16%0.29%0.43%
17%0.23%0.29%0.41%0.16%0.22%0.34%0.10%0.16%0.28%
12%0.19%0.24%0.32%0.12%0.17%0.25%N/A%0.11%0.19%
 
85% and UNDER25%0.24%0.28%0.49%0.17%0.21%0.42%0.11%0.15%0.36%
17%0.17%0.23%0.38%0.1%0.16%0.31%0.04%0.10%0.25%
12%0.12%0.18%0.24%0.05%0.11%0.17%N/A%0.05%0.11%
6%0.10%0.14%0.18%0.03%0.07%0.11%N/A%N/A%0.05%

In addition to the payment plans, the mortgage insurance companies adjust the mortgage insurance rate for:

  • Rate-and-Term Refinance
  • Second Homes
  • Loan Amounts greater than $510,400
  • Employee Relocation Loans
  • Investment Properties
Источник: http://www.anytimeestimate.com/private-mortgage-insurance/calculate-pmi.htm

Private Mortgage Insurance (PMI) Calculator 2021

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What is Private Mortgage Insurance (PMI)?

Private mortgage insurance, also known as PMI, is a form of mortgage insurance for conventional home loans to protect the lender in case the borrower cannot make their mortgage payments and defaults. Mortgage insurance ensures lenders can recover some of their lost investment and allows more individuals to become homeowners by reducing the risk for lenders.

Results

Your PMI Premium Payment

will last 6.1years

Your LTV is less than 80%, so you will not need to pay PMI.

You have to request for PMI termination at 80% LTV. If You don’t, you may spend an additional $2380 on PMI before it automatically terminates at 78% LTV.

Breakdown of Costs

Total Cost Breakdown

Total Interest Payment

$370,830

Total Principal Payment

$450,000

Total PMI Payment

$13,745

What You Should Know

  • If you put less than a 20% down payment on your conventional mortgage, you are required to pay for private mortgage insurance
  • Private mortgage insurance protects the lender if the borrower can not make the mortgage payments.
  • PMI rates range, on average, from 0.55% to 2.25% of the original loan amount
  • Your PMI premiums can be removed once you build 20% equity in your home
  • Government-backed loans such as FHA-loans require mortgage insurance premiums (MIP)

Do I need to get PMI?

The lender will require you to get PMI or insurance for your loan if you decide to put less than 20% down payment of the total loan amount. For example, if the total mortgage amount is $300,000 and you only have $45,000 for the down payment, which is 15% and is less than the required 20%, then you will need to buy PMI for the home loan.

How Much Does PMI Cost?

PMI rates on average can range from 0.55% to 2.25% of the original loan amount. At those rates, for a $300,000 30-year fixed rate mortgage, PMI would cost anywhere from $1,650 to $6,750 per year, or approximately $137.50 to $562.50 per month. PMI can be paid upfront or it is included in the monthly mortgage payments.

What Factors Determine the PMI Rate?

The PMI rate you will receive for your home loan depends on several factors such as:

  • Size of Home Loan – The higher your total loan amount, the higher the PMI rate. The reason being the lender has additional risk if you have a larger loan amount and smaller down payment. For example, if you decide that the maximum value of your down payment will be $50,000, the PMI rate will be higher for a home loan of $500,000 rather than a smaller home loan of $300,000.

  • Down Payment Amount – PMI is required for all home loans where the down payment is less than 20%. However, even within less than 20%, your PMI rate can change based on your down payment amount. You can decide to put as low as 3% on certain loans such as Conventional 97 which is a home loan for individuals who want to put up a small down payment. Smaller down payments will result in a higher PMI rate. Therefore, there will be a big difference in the PMI if you put 18% down rather than 3%.

  • Credit Score – A higher credit score will result in a lower PMI rate as you are seen as more creditworthy and less likely to default on payments. You need to have a credit score of at least 620 to be eligible for a conventional home loan. If you have a credit score less than 620, check out other options such as the FHA Home Loan which offers home loans for credit scores as low as 500.

  • Type of Mortgage – PMI rates tend to be higher for adjustable-rate mortgages (ARM) as compared to fixed rate mortgages. Adjustable-rate mortgages result in higher PMI rates because interest rates can increase, which will increase monthly payments and put more pressure on borrowers, resulting in higher chances of default.

What Are the Different Types of Private Mortgage Insurance?

There are various types of PMI based on how the payment is structured:

  • Borrower Paid Monthly Mortgage Insurance (BPMI)- This is the most common type of PMI where your mortgage insurance is included in your monthly payments thereby increasing your monthly expense. This type of PMI works best if you are unsure of how long you are planning on keeping the mortgage because there is no upfront cost to you.

  • Single Premium Mortgage Insurance (SPMI)- In this form of PMI, instead of doing monthly payments, you decide to pay the total PMI amount upfront thereby not increasing your monthly payments. This form of PMI would be suggested if you have funds available at closing of the home, and that way your monthly expense will remain lower. An advantage of this form of PMI is that it might help you qualify for a larger home loan because you paid the PMI upfront.

  • Lender Paid Mortgage Insurance (LPMI)- Although this sounds great that the lender is footing the bill for the mortgage, it is a bit more complicated than that. The lender indeed does pay the PMI, but they also increase the interest rate on your loan in order to cover the PMI. Essentially you pay for the PMI by getting a higher interest rate on your home loan. The disadvantage of this type of PMI is that the interest rate does not reduce once you reach a loan-to-value of 78% because you’re locked into that interest rate.

  • Split-Premium Mortgage InsuranceThis is the least common type of PMI as it is a combination of monthly paid insurance (BPMI) and single premium insurance (SPMI). The way this type of PMI works is that you pay a portion of the PMI upfront and pay the rest of the PMI in monthly payments as part of the mortgage payments. This might be used by individuals who cannot pay the entire PMI upfront but can cover a portion in order to reduce their monthly costs. For example, on a $500,000 home, with a PMI rate of 1.5%, the total PMI amount is $7,500, but if you decide to pay $3,000 upfront, only the remaining amount of $4,500 is added to your monthly mortgage payments for the first year.

When Can I Stop Paying PMI?

PMI for home loans can be removed if you satisfy at least one of the following:

  • You achieve a 78% Loan-To-Value ratio of the purchase price of the home – If you make enough payments such that your LTV is 78%, then PMI should automatically be removed by the insurer. You can also get PMI manually removed when you have 20% ownership in the house, but you will have to reach out to your insurer to get it removed. In most cases, it takes homeowners 11 years to own enough equity in the home to get PMI removed. For example, on a $300,000 home price, if you have $234,000 outstanding in your mortgage, then you have achieved 78% LTV ($234,000/$300,000) and PMI would be removed.

  • What is the LTV ratio?

    The LTV or loan to value ratio is the portion of the value of the house that you are borrowing through a mortgage. In other words, the percentage of your home’s value that is financed by the mortgage.

    Example - Imagine that you want to purchase a house that costs $100,000 and you can only afford to make a 10% down payment. What is your LTV ratio?

    Down Payment = 10% * House Price = 10% * $100,000 = $10,000

    Mortgage Amount = House Price – Down Payment = $100,000 - $10,000 = $90,000

    LTV ratio = Mortgage Amount /Home Value = $90,000/ $100,000 = 90%

  • You pass the halfway point of your mortgage term - On a 30-year mortgage, for example, PMI must be removed 15 years into the loan. This is true even if the mortgage balance exceeds 78% of the original purchase price of the house.

  • You refinance your mortgage -The last way to get rid of PMI is to refinance your mortgage such that the new loan balance is less than 80% of the home’s current value. This will allow you to avoid paying PMI after the refinancing of the mortgage.

Why Do I Need to Pay for PMI When it is For The Lender’s Benefit?

The reason for this is because the lender is taking on additional risk by lending to you while you’re putting up less money upfront (<20% down payment) and can default on future payments.

However, it is important to understand that it is beneficial for you too because if PMI or insurance was not an option, lenders may not have offered a mortgage for anything less than a 20% down payment, preventing a lot of individuals from becoming homeowners.

PMI also has an additional benefit because lenders can give you a better mortgage rate if you take PMI. The reason for this is because PMI allows lenders to recover a greater portion of their investment as compared to individuals who do not take PMI, allowing them to give you a better rate on your mortgage.

Is PMI Tax Deductible?

PMI is tax-deductible! Just like other forms of mortgage insurance, PMI can be deducted when you file your income tax return. With the Further Consolidated Appropriations Act of 2020, Congress allowed for deductions until December 31st, 2020. It is also available for 2019 and 2018.

How to Calculate your PMI cost?

In order to use the calculator provided above, you will need to input some of the specifics on the home you are trying to purchase and the mortgage you are applying for. First and foremost, if your down payment is 20% or more, you won’t need to pay for private mortgage insurance at all. Next, in order to calculate your monthly mortgage insurance premium, the following will be needed:

Home purchase price – When all other variables stay fixed, the higher the home purchase price, the higher your private mortgage insurance will be. This is because the mortgage insurance rate is multiplied by the loan amount to find your annual mortgage insurance. For the same down payment, a higher home purchase price means that the loan amount will be bigger, and this exposes the lender to more risk, therefore the private mortgage insurance premiums will be higher as well.

Mortgage Insurance Rate – As mentioned above, the mortgage insurance rate is multiplied by the loan amount to find out the premium. A higher mortgage insurance rate means that you will pay a bigger amount on private mortgage insurance.

Down Payment – The down payment you make is deducted from the home purchase price to find out how much financing you will need from the lender. Your private mortgage insurance premiums will be determined based on the amount you borrow.

Example – Calculating PMI

You want to purchase a home that costs $350,000. Since you can only afford to put a 15% down payment, you are required to pay for private mortgage insurance. Your lender notifies you that your mortgage insurance rate will be 0.55%. How much will your monthly PMI premium cost?

1. Down Payment

= 15% * $350,000

= $52,500

2. Loan amount = Home Purchase Price – Down Payment

= $350,000 - $52,500

= $297,500

3. Annual PMI = Loan Amount * Mortgage Insurance Rate

= $297,500 * 0.55%

= $1636.25

4. Monthly PMI

= $1636.25 / 12

= $136.35

You will have to pay approximately $137 each month for PMI.

In order to find out the total PMI premium, the loan interest rate and loan term will be needed. These inputs are used to find out when you will reach an LTV of 80%, so that your PMI can be removed. Depending on the period of time you will have to pay PMI premiums, the Total PMI premium is determined by the PMI calculator.

What Does Private Mortgage Insurance Cover?

When you take out a mortgage and you cannot afford to put a 20% down payment, the lender is at risk. First, since you cannot afford to make a 20% down payment you are viewed as a riskier borrower. Secondly, when the lender has to lend you more money than they would have with the 20% down payment, a greater amount of money is put at greater risk. Therefore, lenders turn to private mortgage insurance companies to assume some of that risk.

The coverage a private mortgage insurance company offers determines what portion of the amount lost the lender will be able to recover in the case that the borrower defaults on their mortgage. For example, if the PMI provider provides 30% coverage, this means that the lender will be paid back by the insurer for 30% of the losses related to the borrower’s default. These losses can include the unpaid principal balance, interest that the lender would otherwise get, and 30% coverage for the lenders’ costs associated with the foreclosure.

For example, imagine that you wish to purchase a $300,000 home with a 5% down payment. The coverage provided by the PMI company is 30%. If you then default on your mortgage while you still owe 90% or $270,000 to the lender, the lender would be able to recover $81,000 from PMI, instead of losing the whole amount. This can help supplement the amount recovered from a foreclosure. PMI would also cover 30% of interest loss and foreclosure costs.

Higher coverage means that the borrower will pay higher insurance premiums. When the lender is lending a lot of money to the borrower and there is a high risk of default, the lender can agree to lend if they are protected by a greater insurance coverage. The PMI company will provide this coverage at a higher cost that the borrower will have to bear.

Private Mortgage Insurance Companies

MGIC – Mortgage Guaranty Insurance Corporation

MGIC is a subsidiary of MGIC Investment Group and it provides private mortgage insurance to lenders of home mortgages across the U.S. The company offers primary coverage and pool insurance. Primary coverage gives the opportunity to people to become homeowners with less than 20% down payment and protects the lender against default. Pool insurance covers losses that are bigger than claim payments in the case of default. MGIC currently operates in all the states of the U.S., Puerto Rico, and Guam. MGIC is one of the largest private mortgage insurance companies which has more than 20% share in the market of PMI providers.

Radian Guaranty Inc.

Radian Guaranty Inc is the primary subsidiary of Radian Group. The subsidiary is in the business of providing private mortgage insurance to lenders and offers various mortgage, real estate, and title services. Radian Guaranty Inc. provides PMI on first-lien mortgage accounts and pool insurance. Currently, Radian works with more than 3,500 residential lenders to make homeownership possible for Americans. Its revenues account for half of the total revenues of its parent company.

Essent Guaranty­­ Inc.

Founded in 2008, Essent Guaranty is headquartered in Pennsylvania and is a subsidiary of Essent Group. To protect home mortgage lenders and mortgage investors, the company offers mortgage insurance and loss management services. The company is approved by Fannie Mae and Freddie Mac and is currently licensed in every state in the U.S. and the District of Columbia.

National Mortgage Insurance Corporation

National MI is another U.S.-based top company that specializes in mortgage insurance and risk protection services for mortgage lenders and investors. The parent company of National MI is NMI Holdings. NMI Holdings ranked 24th in Fortune's list of 100 Fastest-Growing Companies for 2020. Moreover, National MI has been recognized by Fortune in the list of Best Workplaces in Financial Services and Insurance in March 2021.

PMI on FHA Loans

FHA loans are a type of non-conventional loans backed by the Federal Housing Administration in the U.S. FHA loans offer various advantages to conventional loans. For starters, FHA loans have looser financial requirements for borrowers and allow for smaller down payments. Since these are government-backed loans, it means that in the case that the borrower defaults on their payments, the government agency will partially or fully pay the lender for the losses incurred. This is why lenders can assume a bigger risk and offer more favorable requirements. For example, if you have a credit score of at least 580, you can qualify for an FHA loan with only 3.5% down payment. When your credit score is between 500 and 580, you would have to put at least 10% down.

While conventional lenders use PMI, FHA-lenders protect themselves by mortgage insurance premiums (MIP) against borrowers who present a high risk of default. MIP is typically made of an upfront payment of around 1.75% of the loan amount and an annual premium that ranges from 0.45% to 1.05% of the loan amount. That is why MIP often proves to be more expensive than PMI. Key differences between MIP and PMI include:

  • Upfront Premium – As mentioned above, MIP requires the borrower to pay an upfront premium of 1.75%. This premium can either be paid upfront or can be rolled over into the loan balance. If you choose to go with the second option, the higher loan balance will lead to a higher interest expense. PMI, on the other hand, only requires an upfront payment if you are getting Single-premium mortgage insurance or a Split-premium mortgage insurance.

  • Cancelling Mortgage Insurance - The biggest difference between MIP and PMI is that you cannot cancel your mortgage insurance with MIP once you reach 20% equity in your home. If you have initially put at least 10% down, you are required to pay MIP for 11 years of the loan. On the other hand, if you have put a down payment of less than 10%, you are required to pay MIP for the whole life of the loan. The only way that you can stop paying for MIP is if you refinance your loan into a non-FHA loan product.

  • Contribution by Seller – With FHA loans, the seller is permitted to contribute to closing costs up to 6% of the home’s purchase price. This means that the seller can also pay for some or all of the upfront mortgage premium. In conventional loans, sellers are allowed to contribute up to only 3%.

PMIMIP
Payment StructureAnnual fee (Except for SPMI and Split-Premium Mortgage Insurance)Upfront Payment + Annual Fee
Mortgage Insurance Rate0.55% - 2.25%Upfront: 1.75% Annually: 0.45% - 1.05%
Down Payment< 20%For all FHA loans, no matter the down payment
Credit scoreHas an impact on the rateDoes not have an impact on the rate
CancelationOnce an LTV ratio of 78% is reachedAfter 11 years – for down payments of at least 10% For the entire loan term – for down payments of less than 10%
LenderPrivate institutionsFHA-approved institutions

Any calculators or content on this page is provided for general information purposes only. Casaplorer does not guarantee the accuracy of information shown and is not responsible for any consequences of its use.

Источник: https://casaplorer.com/pmi-mortgage-insurance-calculator

Home Value: the appraised value of a home. This is used in part to determine if property mortgage insurance (PMI) is needed.

Loan Amount: the amount a borrower is borrowing against the home. If the loan amount is above 80% of the appraisal then PMI is required until the loan is paid off enough to where the Loan-to-value (LTV) is below 80%.

Interest Rate: this is the quoted APR a bank charges the borrower. In some cases a borrower may want to pay points to lower the effective interest rate. In general discount points are a better value if the borrower intends to live in the home for an extended period of time & they expect interest rates to rise. If the buyer believes interest rates will fall or plans on moving in a few years then points are a less compelling option. This calculator can help home buyers figure out if it makes sense to buy points to lower their rate of interest. For your convenience we also publish current local mortgage rates.

Loan Term: the number of years the loan is scheduled to be paid over. The 30-year fixed-rate loan is the most common term in the United States, but as the economy has went through more frequent booms & busts this century it can make sense to purchase a smaller home with a 15-year mortgage. If a home buyer opts for a 30-year loan, most of their early payments will go toward interest on the loan. Extra payments applied directly to the principal early in the loan term can save many years off the life of the loan.

Property Tax: this is the local rate home owners are charged to pay for various municipal expenses. Those who rent ultimately pay this expense as part of their rent as it is reflected in their rental price. One can't simply look at the old property tax payment on a home to determine what they will be on a forward basis, as the assessed value of the home & the effective rate may change over time. Real estate portals like Zillow, Trulia, Realtor.com, Redfin, Homes.com & Movoto list current & historical property tax payments on many properties. If property tax is 20 or below the calculator treats it as an annual assessment percentage based on the home's price. If property tax is set above 20 the calculator presumes the amount entered is the annual assessment amount.

PMI: Property mortgage insurance policies insure the lender gets paid if the borrower does not repay the loan. PMI is only required on conventional mortgages if they have a Loan-to-value (LTV) above 80%. Some home buyers take out a second mortgage to use as part of their downpayment on the first loan to help bypass PMI requirements. FHA & VA loans have different down payment & loan insurance requirements which are reflected in their monthly payments.

Homeowners insurance: most homeowner policies cover things like loss of use, personal property within the home, dwelling & structural damage & liability. Typically earthquakes & floods are excluded due to the geographic concentration of damage which would often bankrupt local insurance providers. Historically flood insurance has been heavily subsidized by the United States federal government, however in the recent home price recovery some low lying areas in Florida have not recovered as quickly as the rest of the market due in part to dramatically increasing flood insurance premiums.

HOA: home owner's association dues are common in condos & other shared-property communities. They cover routine maintenance of the building along with structural issues. Be aware that depending on build quality HOA fees can rise significantly 10 to 15 years after a structure is built, as any issues with build quality begin to emerge.

Our site also publishes an in-depth glossary of industry-related terms here.

Источник: https://www.mortgagecalculator.org/

What is private mortgage insurance?

Tip

You may be able to cancel your monthly mortgage insurance premium once you’ve accumulated a certain amount of equity in your home. Learn more about your rights and ask lenders about their cancellation policies.

Like other kinds of mortgage insurance, PMI can help you qualify for a loan that you might not otherwise be able to get. But, it may increase the cost of your loan. And it doesn’t protect you if you run into problems on your mortgage—it only protects the lender.

Lenders sometimes offer conventional loans with smaller down payments that do not require PMI. Usually, you will pay a higher interest rate for these loans. Paying a higher interest rate can be more or less expensive than PMI—it depends on a number of factors, including how long you plan to stay in the home. You may also want to ask a tax advisor about whether paying more in interest or paying PMI might affect your taxes differently.

Borrowers making a low down payment may also want to consider other types of loans, such as an FHA loan. Other types of loans may be more or less expensive than a conventional loan with PMI, depending on your credit score, your down payment amount, the particular lender, and general market conditions.

You may also want to consider saving up the money to make a 20 percent down payment. When you pay 20 percent down, PMI is not required with a conventional loan. You may also receive a lower interest rate with a 20 percent down payment.

Ask lenders to show you detailed pricing for different options so you can see which option is the best deal.

Warning: Private mortgage insurance protects the lender—not you. If you fall behind on your payments, PMI will not protect you and you can lose your home through foreclosure.

Источник: https://www.consumerfinance.gov/ask-cfpb/what-is-private-mortgage-insurance-en-122/

You might have found this page by searching for a private mortgage insurance (PMI) calculator. And that’s fair: Of course you want to know much you’ll pay for PMI (known simply as mortgage insurance, or MI, if you’re getting a government-backed loan), and whether it’s a requirement for your loan — it likely will be if your down payment is less than 20%. So what do you need to know about MI and PMI rates?

But let’s dig deeper to help you understand what mortgage insurance is even all about, who has to have it, and why. Our expert-backed primer also includes the variables that affect mortgage insurance rates, strategies for lowering it — and how and when you can get rid of it altogether.

A person using a phone to learn about pmi rates.

What’s mortgage insurance, and who has to pay it?

Mortgage insurance is designed to protect your lender if you can’t make your payments.

It’s usually required when a borrower gets a conventional mortgage and makes a down payment that’s less than 20% of the home’s purchase price. Some buyers may not put that amount down simply because they can’t afford to do so. Others might prefer to keep the down payment smaller to free up more cash on hand for repairs, remodeling, emergencies, or other eventualities.

To be clear, mortgage insurance does not insure the home, but rather, it insures the loan.

“If somebody has a conventional loan and they only put 5% down — meaning that the lender is going to lend 95% — they’re going to say OK, we’re going to charge you mortgage insurance,” explains Carl Young, a top-selling agent based in the Knoxville, Tennessee region who works with 75% more single-family homes than other agents in his area. The mortgage insurance remains in place, he says, until the buyer can drop it because you’ve accrued 20% or more in home equity.

Katie Padgett, an agent on Young’s team, further explains that mortgage insurance “is going be set up by the lender to protect them. It really doesn’t have anything to do with the house per se. It’s actually just protecting the loan itself because the lender is looking at it as a way of getting value back on what they loaned to you” in the event of a default.

How mortgage insurance works

Your lender may require you to make ongoing monthly mortgage insurance payments, an upfront payment at closing, or a combination of the two (more on this later).

In general, lenders who offer loans with a down payment that’s lower than 20% may include mortgage insurance as part of their monthly mortgage payments. The cost of the insurance will vary based on different factors, such as a borrower’s credit score and the loan-to-value ratio (LTV), the amount owed on the home’s mortgage compared to its appraised value.

The borrower pays these mortgage insurance premiums until they’ve built up at least 20% equity in the home, at which time they can request that their lender drop the insurance. (Borrowers with FHA loans who put less than 10% down when they take out the loan must pay FHA mortgage insurance premiums for the lifetime of the loan.) When the borrower’s principal balance reaches 78% of the home’s value — or the homeowner reaches 22% in equity, in other words — mortgage insurance automatically ends.

You can expect to pay approximately between $30 and $70 in mortgage insurance premiums per month for every $100,000 borrowed. You can also request to cancel it sooner — say, if your home’s value increases through remodeling or market swings, and an appraisal demonstrates that. (But more on that later, too.)

Why lenders require mortgage insurance

Mortgage insurance protects your lender in the event that you stop making your mortgage payments and default on the mortgage.

If the house goes into foreclosure, it will be sold at auction, and it may not attract a high enough price to cover the remaining balance of the mortgage. Mortgage insurance helps make up the difference to the lender.

How much does mortgage insurance cost?

Mortgage insurance costs vary, but they typically range from 0.5% to 1% of the loan amount annually (though it can go up to about 2.25%).

Let’s look at an example of a borrower with a $300,000 mortgage. The mortgage insurance could be $1,500 to $3,000 per year (of course, that’s in addition to the monthly mortgage payment, homeowner’s insurance, and property taxes).

As a very general guideline, Young’s team estimates typical buyers in their area might expect to pay between $50 and $200 monthly for mortgage insurance.

“It varies from lender to lender and borrower to borrower,” Padgett explains.

“Between half a percent and 1% percent of the loan is going to be the easiest average to keep in mind, but it can go lower or higher for sure.”

What factors into your mortgage insurance rate?

Here’s how these variables factor into your mortgage insurance rate:

  • The size of the loan: Obviously, 1% or so of a larger loan corresponds to a larger monthly premium than it would for a smaller loan.
  • Down payment amount: Mortgage insurance is required when the down payment is small in order to protect the lender. You won’t have to pay it if you put 20% down on a home.
  • LTV: The cost of your mortgage insurance varies based on that loan-to-value ratio, or the amount of money a borrower owes on the mortgage compared to the home’s value.
  • Your credit score: Borrowers with higher credit scores will have lower mortgage insurance rates.
  • Your loan term: Shorter loan terms will have higher monthly insurance payments.
  • How much coverage is being provided on the home: More coverage means higher payments.

How to estimate your mortgage insurance

It’s not easy to calculate mortgage insurance yourself, but it’s helpful to get a sense of your general range to guide your expectations.

So let’s say that a typical mortgage insurance rate ranges from 0.5% to 1%. To secure the home, you want to borrow $150,000. You’ll likely pay somewhere between $750 ($150,000 x  0.005%) and $1,500 ($150,000 x .01) every year in mortgage insurance.

Of course, if you’re putting more money down — closer to 20% — and you have a higher credit score, the rate will likely be a bit lower. Likewise, if you’re putting down less and have lower credit, your rate could be on the higher end — up to 2.25%.

To get a closer estimate based on your custom specs, try plugging your data into this online mortgage insurance calculator

A person holding cash that will relieve them of pmi rates.

When can you get rid of mortgage insurance?

You can get rid of mortgage insurance when you reach 20% equity (that is to say, when your mortgage balance reaches 80% of the original purchase price) by requesting the lender drop it. Otherwise, the lender is required to drop it automatically when you reach 22% equity, as long as you haven’t missed any of your scheduled payments and remain in good standing.

Keep an eye on these numbers, because the lender may keep the mortgage insurance on the books until the last possible moment.

“More often than not, it will fall off on its own, ” Padgett says but lenders are only required to remove it on conventional loans once you have reached 22% equity on the original appraised value.

She notes that you can take a proactive role in getting rid of mortgage insurance if you feel there’s a reason to make the case — for instance, if you do a substantial remodel or if the market dramatically lifts your home value over a short time.

“If you think that you’ve added value to the home, you can get the home appraised and argue the mortgage insurance at that point, when they find the new value of the home,” Padgett says.

The four main types of mortgage insurance

There are four main types of mortgage insurance, with different rules and payment structures. Let’s go through the basics as well as the pros and cons of each.

Borrower-paid

This is the most common type of mortgage insurance. It’s an additional monthly fee you pay with your mortgage payment until you reach 20% equity (or it will drop at 22% equity if you don’t request to remove the insurance).

You can include these payments with your monthly mortgage or pay them separately. The major pro here is that you don’t have to pay for mortgage insurance all at once. But the major con is that you’ll pay more each month.

Lender-paid

Your lender takes care of the insurance in this type of mortgage insurance — sounds great, right?

Sure, your monthly payments could be lower than if you were paying for the MI out of pocket monthly, but the lender covers its costs for the MI by charging the borrower a higher interest rate, so you could be paying more over the life of the loan. Also, you can’t cancel lender-paid mortgage insurance when you gain equity in your home because this type is wrapped into your mortgage.

Single premium

This is when you pay the entire premium upfront in one lump sum, either at closing, or the cost can be lumped into the mortgage. This keeps your monthly financial obligation lower, but you have to pay more in upfront costs. And because you’ve paid all at once right off the bat, there’s a chance you could lose money if you sell or refinance your home before reaching the 20% equity threshold. (No refunds on what you already paid for your single-premium mortgage insurance!)

This type of mortgage insurance might work for a borrower who expects to stay in the home for a long time.

Split premium

With this (somewhat uncommon) hybrid model, you pay part of the premium upfront, and the rest monthly. Through this type of mortgage insurance, your monthly payments are lower than they would be with borrower paid, and you’ll pay less upfront than you would with single premium. Plus, you can cancel your portion when you gain more equity.

The seller may cover these costs for the borrower. But if they decide not to, it could be a better bet to just put more cash toward your down payment than toward these upfront mortgage insurance costs.

A woman with coffee meeting a lender to discuss pmi rates.

How to save money on mortgage insurance

As with most financial commitments, you might be able to save money on your mortgage insurance by shopping around for different lenders. By default, your lender will choose your insurer for you, but you may be able to choose which insurer covers your mortgage if your lender offers options.

In order to secure a better rate, you can also work to improve your credit score. And if possible, you can make a larger down payment on the home, thereby lowering the lender’s risk exposure and reducing (or eliminating) the need for mortgage insurance.

You might also consider a so-called piggyback second mortgage, also known as an 80/10/10 loan. Through this process, you are buying a house with two mortgages at the same time, with one covering 80% of the home price and the other covering 10%. Your down payment covers the last 10% of the purchase price. This option allows you to avoid mortgage insurance while only putting 10% down on the loan, but comes with its own set of pros and cons. .

Mortgage insurance might feel like an unnecessary expense, but a lot of buyers find it worth the cost to get their foot in the homeownership door. Talk to a qualified financial professional or loan originator to learn more about whether you’d need mortgage insurance and how to think about mortgage insurance and PMI rates.

Header Image Source: (CoWomen / Pexels)

Источник: https://www.homelight.com/blog/buyer-pmi-rates/

What Are Mortgage Insurance Premiums (MIPs)?

Mortgage Insurance Premium FAQs

Let’s take a look at some commonly asked questions about MIP.

Are There Ways To Avoid MIPs?

FHA loans are often seen as a good option for borrowers with less money saved up as they allow down payments as low as 3.5%. However, because of this, it’s impossible to avoid MIP on an FHA loan.

If you have enough cash saved up to make a 20% down payment, applying for a conventional mortgage might be a better option for you. When you make a 20% down payment on a conventional loan, you won’t have to pay for mortgage insurance. Additionally, if you put down less than 20%, you’ll be able to have PMI removed when you reach 20% equity in your home, which isn’t usually the case for MIP on FHA loans.

How Long Do MIP Payments Continue?

In some cases, you may be able to have MIP removed. However, many FHA borrowers will pay MIP for the life of their loans.

  • If you made a down payment of 10% or more, you may be able to have MIP removed after 11 years of making payments.
  • If you received your loan prior to June 3, 2013, you may qualify for cancellation if you’ve reached 22% equity in your home.

If you have at least 20% equity in your home but aren’t eligible to have MIP removed, your best option may be to refinance into a conventional loan – as long as that makes sense for your current financial situation. When you refinance into a conventional loan and keep at least 20% equity in your home, you won’t be required to purchase mortgage insurance.

If you want to know more about MIP on your mortgage, you can speak with one of our Home Loan Experts.

Источник: https://www.quickenloans.com/learn/mortgage-insurance-premiums

FHA loan calculator

Take the next step.

Prequalify

Use this FHA mortgage calculator to get an estimate.

An FHA loan is a government-backed conforming loan insured by the Federal Housing Administration. FHA loans have lower credit and down payment requirements for qualified homebuyers. For instance, the minimum required down payment for an FHA loan is only 3.5% of the purchase price. The FHA mortgage calculator includes additional costs in the estimated monthly payment. Such as, a one-time, upfront mortgage insurance premium (MIP) and annual premiums paid monthly.

This FHA loan calculator provides customized information based on the information you provide. But, it assumes a few things about you. For example, that you’re buying a single-family home as your primary residence. This calculator also makes assumptions about closing costs, lender’s fees and other costs, which can be significant.

Estimated monthly payment and APR example: A $175,000 base loan amount with a 30-year term at an interest rate of 4.125% with a down-payment of 3.5% would result in an estimated principal and interest monthly payment of $862.98 over the full term of the loan with an Annual Percentage Rate (APR) of 5.190%.1

Источник: https://www.usbank.com/home-loans/mortgage/mortgage-calculators/fha-mortgage-calculator.html
how to calculate mortgage insurance payment

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