MORTGAGE CALCULATOR AND IMPORTANT INFORMATION FOR BUYERS
You can use this handy Mortgage Calculator to assist you with calculating your approximate mortgage payment. This tool is only an estimate. Please consult with a mortgage lender/broker to get an official estimate of a potential mortgage payment.
PMI - Private Mortgage Insurance
Whether it's called “private mortgage insurance” (PMI) or just plain “mortgage insurance” (MI), mortgage insurance is an insurance policy which protects the lender in the event that you, the borrower, fail to make your mortgage payments. You pay for a policy as an inducement for the lender to offer you financing.
Don't confuse PMI with credit life insurance. Mortgage insurance won't pay your mortgage each month should you become disabled, unemployed or deceased, and pays nothing to you or any of your beneficiaries.
In general, if you can't (or don't want to) come up with a 20 percent down payment to buy your home, or don’t have a 20 percent equity stake when you refinance, you'll be required to purchase a private mortgage insurance policy as part of the mortgage process. It's a tenet of mortgage lending that borrowers who don't have fairly substantial equity in their home are more likely to default. That's primarily why lenders insist that buyers borrow no more than 80 percent of the home price. Of course, having to come up with the other 20 percent -- in cash -- discourages many potential buyers who don't have such a large sum of money on hand.
The average cost of private mortgage insurance, or PMI, for a conventional home loan ranges from 0.55% to 2.25% of the original loan amount per year, according to Genworth Mortgage Insurance, Ginnie Mae and the Urban Institute. As an example; $250,000 loan balance x .0055 = $1,375 per year/12 months = $114.58 per month.