How to Calculate Mortgage PMI


You will have to pay PMI if the value of your mortgage loan is less more than 80% of the value of the home. Private mortgage insurance is a policy meant to protect lenders from defaulting borrowers. Most borrowers will pay this value in addition to what they pay off to the company every month. You will be able to calculate the value of your PMI and figure how much you can save by avoiding it altogether.

You will need an appraisal of your home first. This will be the current market value of your home. Since you want it for yourself, you do no need to ask the company to do it for you. However, you will need a company-ordered appraisal if you want to justify the removal of your PMI. The appraisal will give you the value of the home you want to buy. You will also need to know the down payment you will be paying as a percentage of the total value of the home. The total value of the loan is total value of the loan less the amount of down payment you will have to make to the company.

The amount of loan that you have will have to be multiplied by the PMI rate offered by the company. The PMI rate is different depending on the company you are dealing with. For you to find out the rate, you will need to know the LTV (loan to value) rate first. This is the value of the loan divided by the value of the home. Whatever percentage you will get, check the corresponding rate according to your company. This is the PMI rate and the amount that will be multiplied by the total figure of the loan. After this, divide the PMI rate by 12 months to get the payments you will have to pay per month.

Rates can change with every month that passes. Also, with the current economic crisis, you can expect that you may have to pay more PMI rates with the coming months. Always call the company to ensure that the rates are what you expect them to be. Always calculate the LTV and when it falls to a rate below 80%, you will not need to pay off the PMI as the company will not need to insure your loan. Ensure that you have told the company to schedule an appraisal first. When the value has dropped to below 80%, you will be justified to tell the company to cancel the PMI premiums on your loan.

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