Table of Contents
- Calculating PMI Per Month
- Calculating Mortgage Premium
- PMI on $100,000 Mortgage
- PMI on $300,000 Loan
Calculating PMI Per Month
Private Mortgage Insurance (PMI) is an insurance policy that protects lenders from the risk of default and foreclosure, allowing buyers who cannot make a large down payment (or any down payment) to purchase a home. PMI is required for most conventional loans with less than a 20% down payment. PMI can be paid monthly or in a lump sum, and the amount depends on the size of the down payment, the loan amount, and the borrower’s credit score.
To calculate the monthly PMI payment, you’ll need to know the loan amount, the down payment amount, and the PMI rate. The PMI rate is typically 0.5%-1% of the loan amount, depending on the size of the down payment and the borrower’s credit score. Once you have these three numbers, use the following formula to calculate the PMI payment:
Monthly PMI Payment = (PMI Rate x Loan Amount) / 12
Calculating Mortgage Premium
Mortgage premium is the amount of money paid to the lender by the borrower in order to secure the loan. It is usually paid in a one-time lump sum at closing, but can also be paid as a monthly fee. The amount of the mortgage premium depends on the size of the loan, the down payment amount, and the borrower’s credit score. To calculate the mortgage premium, use the following formula:
Mortgage Premium = (Loan Amount x PMI Rate) + (Down Payment Amount x PMI Rate)
PMI on $100,000 Mortgage
For a $100,000 mortgage with a 10% down payment and a PMI rate of 0.5%, the monthly PMI payment would be $41.67 and the mortgage premium would be $500. The total cost of PMI for the loan would be $500.
PMI on $300,000 Loan
For a $300,000 mortgage with a 10% down payment and a PMI rate of 0.5%, the monthly PMI payment would be $125.00 and the mortgage premium would be $1,500. The total cost of PMI for the loan would be $1,500.