Private mortgage insurance is a type of insurance required on some mortgage loans that protects a mortgage lender against loss if a borrower defaults on the loan. The cost of private mortgage insurance (PMI) is passed on to the borrower and is not paid by the lender. One of the benefits of a PMI mortgage calculator is to discern the added cost of mortgage insurance.
The mortgage loans that are required to pay for private mortgage insurance are those in which the buyer has less than a 20 percent down payment or in the case of a refinance, a loan that is at 80% loan to value (LTV) or greater. The loan to value for a refinance is a measure of the refinanced loan amount relative to the value of the property. An $80,000.00 home loan for a $100,000.00 valued home would have an LTV of 80%. The PMI mortgage calculator or a standard mortgage calculator can quickly calculate the LTV of a loan.
As part of the loan parameters established in the secondary market by Fannie Mae, Freddie Mac and other mortgage market investors, a borrower is required to have private mortgage insurance (PMI) on a home purchase or refinance loan transaction with 80% loan to value or greater. Home buyers and refinance candidates should always plug sample loan numbers into the online mortgage calculators to become familiar with the loan to value request on a particular loan transaction. Loan to value is a key approval parameter for all home loans.
For the home loan borrowers, mortgage insurance has both pros and cons. Mortgage insurance increases the monthly mortgage payment since the cost of mortgage insurance will be added on to the payment either as a separate charge or paid in the form of a higher interest rate. The benefit of mortgage insurance is that the insurance makes it possible for home loan borrowers to buy a home or refinance an existing mortgage loan with as little as a 5 percent down payment.
With the mortgage calculators, the home loan borrower can quickly review a variety of loan scenarios with lower and higher down payment amounts. The mortgage calculator will display the monthly mortgage payment based on different loan amounts and different loan to values, making it easier to evaluate the benefits and costs for private mortgage insurance.
The cost of private mortgage insurance varies based on the loan amount, property value and underwriting conditions for the specific loan request. Generally, the cost of private mortgage insurance is between one-half percent and one percent of the total loan amount. A high loan to value loan request will have a higher PMI cost than one that is closer to 80% LTV. Adjustable rate mortgages often have higher PMI costs than fixed rate mortgages. Since the PMI costs vary with the loan qualifications and loan type, the PMI mortgage calculator will provide only an estimate of the costs.
By using the PMI mortgage calculator, a borrower can obtain an estimate of the insurance costs for any number of loan amounts and home values. As an example, if a home buyer was purchasing a home for $200,000.00 and placing a down payment of $20,000.00, the annual cost of PMI on the $180,000.00 mortgage would be approximately $93.00. This charge would be added to the mortgage payment each month.
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The mortgage calculator with PMI is one of the online mortgage calculators that will calculate how much mortgage insurance costs will be add to a monthly mortgage payment.
Private mortgage insurance, mortgage insurance and the acronyms PMI and MI are used interchangeably in the mortgage industry and all of these terms have the same definition.
A home loan borrower that puts less than 20% down payment to buy a home will have to pay private mortgage insurance or PMI. Most all mortgage lenders require mortgage insurance for home loans that have a down payment under 20 percent. The mortgage calculator with PMI is designed to calculate the monthly mortgage payment on a home loan that requires this added charge.
Private mortgage insurance (PMI) is insurance that protects the mortgage lender against loss if the borrower stops making mortgage payments. Even though it protects the mortgage lender and not the borrower, it is paid by the borrower.
The primary benefit of PMI to the borrower is that it may allow a home buyer the ability to buy a house with a much smaller down payment, as low as five percent of the price of the house instead of the more common 20 percent. Since the mortgage insurance helps protect the mortgage lenders from the high costs of foreclosure, it allows the lender to accept a lower down payment which is the benefit passed along to home buyer with some cost, the cost of the PMI.
Prospective home loan borrowers can use the mortgage calculator with PMI to estimate the monthly PMI cots for their new mortgage loan to ascertain a more accurate cost of homeownership.
This mortgage calculator can be used to figure out monthly payments of a home mortgage loan, based on the home’s sale price, the term of the loan desired, buyer’s down payment percentage, and the mortgage interest rate. This mortgage calculator factors in PMI for loans where less than 20% is put as a down payment. Also taken into consideration with the mortgage calculator in the monthly payment costs are the property taxes and the homeowners insurance.
The mortgage calculator can only offer estimates on PMI costs due to changes in the coverage offered in the market and the varying attributes that are found in a specific home loan that will alter the cost of the PMI. Private mortgage insurance premiums vary based on the amount and terms of the mortgage, among other factors. Other factors impacting the PMI charges range from the size of the down payment, type of mortgage, the borrower’s credit history and amount of insurance coverage.
The mortgage payment calculator with PMI is a good tool for estimating the total monthly mortgage payment when mortgage insurance is going to be required by the mortgage lender. To obtain a more precise figure for the cost of PMI, the mortgage lender can provide this figure based on the specific loan terms as well as the credit profile of the borrower.
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