A simple way to calculate the payoff date, PMI payoff date, annuity, down payment, total interest, total PMI…
What is Private Mortgage Insurance (PMI)?If you’ve ever shopped for a mortgage, you’ve probably heard of PMI, or private mortgage insurance. But like many mortgage shoppers, you may be unfamiliar with exactly what it is and when it applies.
What is Mortgage Insurance?
Many mortgage shoppers have the impression that mortgage insurance somehow protects them. In reality, it only protects the lender against loss if you stop making the payments on your mortgage. It used to be that lenders considered it far too risky to lend more than 80% of the value of a home, which meant that home buyers had to make a minimum 20% down payment. Mortgage insurance was created to enable lenders to do higher loan-to-value loans while mitigating risk, which meant that borrowers could make smaller down payments to get into a home. There are several types of mortgage insurance, but PMI only applies to conventional non-government lending. You may have also heard of MIP (mortgage insurance premium) and UFMIP (upfront mortgage insurance premium), but these apply only to FHA financing.
When Is PMI Required?
PMI only applies to conventional financing when the equity position or down payment in the home is less than 20%. In other words, if the loan is to be more than 80% of the value of the home, PMI will typically be required. PMI is most commonly paid in monthly installments as part of your mortgage payment. How much the PMI payment will be depends on the loan amount, credit score, and loan term. Shorter term loans, such as 15-year fixed or 10-year fixed, tend to have much lower PMI payments than longer term loans like the 20-year or 30-year fixed. Higher credit scores tend to be rewarded with lower PMI payments as well.
If you’re required to carry PMI, the good news is that you’re not stuck with it for the life of the loan. You can ask your lender to cancel it once you’ve paid down the loan balance to 80% loan-to-value or less.
PMI Calculator is Absolutely Helpful
The Simplest Way to Calculate your Private Mortgage Insurance
It is not possible to get a loan without insurance. Some types of insurances, like is Homeowner insurance for instance, protect the real estate from unexpected events like fire, burglary, storms, etc., and some of them protect the lender, if the loan owner stops making payments on his or her mortgage. One of those kinds of loan insurances is a Private Mortgage Insurance or PMI. It has to be paid in case that a person borrows more than 80 % of the value of the real estate, which means that down payment or the portion of money that is given in cash at the time of purchase is less than 20 %. If the amount of down payment is higher, borrower does not have to pay private mortgage insurance.
With the use of quality designed online Calculator it is possible to get exact information, how much will a monthly payment of a conventional mortgage be, in case that down payment will be less than 20 % and it will be necessary to include Private Mortgage Insurance in each monthly payment. The amount of money somebody has to pay for private mortgage insurance vary depending on different criteria, so it is sometimes hard to calculate exact expenses, if you do not have online Calculator that makes this task much easier.
Why it is Smart to Use PMI Calculator?
Banks and other lenders of the loans do not like to risk, so they protect themselves with the Private Mortgage Insurance (PMI). The borrower is required to pay for it until he or she does not pay enough lended money back to the bank. After that, his or her loan is not considered as a high risk anymore, so paying private mortgage insurance is not necessary.
Calculator not tell you only how much money would you have to pay for private mortgage insurance monthly, annually or upfront, but also when you can stop paying for it. This is essential information for every borrower, because in the moment when 20 % of equity is paid he or she can request PMI cancellation from a bank or other lender of a loan.
With a help of Calculator a borrower can determinate the moment, when paying for private mortgage insurance is no longer necessary, due to the amount of money that was already paid. That moment can be calculated with loan to value ratio that shows the exact date when the loan’s principal balance fall to 80 % of the home’s purchase price and so there is no need to continue paying for Private Mortgage Insurance. If the borrower decides to make some additional payments, principal balance would get reduced earlier and it would be possible to cancel private mortgage insurance on loan much sooner.
PMI Calculator is a very useful online tool that can help borrowers, who want to calculate exact costs, expenses and payment of their mortgage. It can give them a whole financial picture of their loan.