Online Mortgage Calculator

For those of you who are buying your first home there is a whole lot of information that you will need to know. This article will teach you how to calculate Private Mortgage Insurance (PMI). PMI is an insurance that your lender will probably require you to carry on your mortgage if you are young, have a lower income, or you do not put down at least 20% of the value of your property as a down payment. Do not get PMI confused with Mortgage Insurance Premiums (MIP) that as associated with Federal Housing Administration (FHA) or Veteran’s Administration (VA) loans. All three of these insurance premiums can be calculated in the same way. The paragraphs that follow are moderately challenging instructions on how to calculate private mortgage insurance.

First, you need to figure your loan to value ratio. It is very easy to do. Loan value ratio is the amount that remains when you deduct your down payment from the total loan amount. Here’s an example: Let’s say that you are applying for a mortgage for a home that will cost $100,000. You have set aside $5,000 for the down payment. This would figure out to be 5% of the appraised value of the home. $100,000 – $5,000 = $95,000 or 100% – 5% = 95%. $95,000 is 95% of $100,000 and this makes your loan to value ratio 95%.

Second, you must know what type of loan you qualified and applied for. There are three categories of conventional loans. There is the fixed rate loan, the rate buy down loan, and the adjustable rate mortgage loan. This section is using your interest rate on the loan as the variable for calculations. This interest rate that you will pay is determined by your credit score and the market rate offered. If you or fortunate enough to have a high credit score, your interest rate will be lower than if you have a lower credit score. Here’s an example: Let’s say you qualify for an interest rate of 5%, fixed rate conventional loan. In this case, your PMI would be ½% for a 30 year mortgage and for a 15 year mortgage it would be ¼%.

Third, you need to multiply the interest rate of 5% by the total amount of the loan. We’re using $100,000 for the amount of your loan. $100,000 X .05 = $500. The $500 amount is your yearly rate for PMI for a 30 year loan period. $100,000 X .25 = $250. The $250 amount is your yearly rate for PMI for a 15 year loan period.
Fourth, to determine your monthly premium you need to divide the yearly amount by 12 (number of months/payments in a year). Using our example of $100,000 loan with $500 a yearly PMI: $500/12 = $41.67. The $41.67 amount is your monthly PMI for your 30 year mortgage. $100,000 loan with $250 yearly PMI: $250/12 = $20.83. The $20.83 amount is your monthly PMI for your 15 year mortgage. As you can see, the monthly amount that you will pay varies with the length of your loan and the amount.

Fifth, add the monthly premium of your PMI to your monthly mortgage payment amount. Remember your mortgage payment includes the amount you pay on the principal amount of the loan, the amount you pay for property insurance, and the amount you pay for property taxes. You will add all four of these figures together and you will know the amount of your monthly mortgage payment. Congratulations! You are a success! You now know how much you will pay for your private mortgage insurance payment.