The PMI Removal Calculator is the premier resource for removing pre-loan mortgage insurance (PMI) from your mortgages. Using the calculator, you can determine how much money can be saved by eliminating the PMI from your mortgage before refinancing. The calculator also helps you calculate your closing costs before and after removing PMI.
PMI Removal Calculator and it Uses
If you’re planning to purchase a home and have PMI, one of the first things you should do once you’ve found your dream home is run the numbers to see if you qualify to have PMI removed from your mortgage. Here’s a full step-by-step guide to use a PMI Removal Calculator.
Calculate Your Debt-to-Income Ratio
Debt-to-Income ratio is perhaps one of the most common measures used in mortgage qualification today. How do you calculate your debt-to-income ratio? It’s pretty simple, and it will take only minutes to complete. First, take all of your monthly debts (including credit cards) and divide that total by your gross monthly income.
For example, if you have $1,500 in credit card debt and make $5,000 a month at work, your DTI would be 30%. If there is more than one person on your loan application (e.g., if you’re married), you’ll need to add up all of your debts and divide that by two.
Read the Results From an Online Calculator
For example, you will generally find that if you are looking at buying and renovating your home, you must save up between 20 and 30 percent of your cost to avoid having private mortgage insurance (PMI). Following these guidelines, you must pay off as much of your house as possible before taking out loans for other things to have less debt.
You can use Credit Sesame’s PMI Removal Calculator or Bankrate’s Mortgage Payoff Calculator can be used. With either tool, plug in how much you paid for your house and where interest rates stand now – basically provide information on what happened after you paid closing costs – and follow the online prompts.
What You Need To Know About Private Mortgage Insurance
If you’re buying a home, it’s almost inevitable that you’ll have to take out a loan. In most cases, lenders require that you either pay cash for your home or at least put down 20% of its value. The other 80% is covered by a mortgage loan from your lender—which, in turn, requires insurance.
This type of insurance is known as private mortgage insurance (PMI). You’ll pay for PMI in monthly payments over your loan period; typically, these payments are added to your average monthly mortgage payment.
Is Private Mortgage Insurance Worth It?
A private mortgage insurance (PMI) policy is required if you make a down payment of less than 20% on your home. This type of insurance protects lenders if you cannot repay your loan; however, depending on your financial situation, it might not be worth it.
Before purchasing a policy and paying monthly premiums, consider whether or not you’ll need financing down the road. If so, determine if saving money now will mean having more available for investment later. Once that’s clear, weigh whether paying for private mortgage insurance is an investment in yourself or simply an unnecessary expense.
How Private Mortgage Insurance Affects Your Monthly Payments
Private mortgage insurance (PMI) helps protect a lender if you default on your loan. It may also be required for certain mortgages, like conventional loans with down payments below 20 percent. So,
How Does PMI affect your monthly income?
Here’s a quick explanation of how it works.
Typically, your monthly payment will comprise two parts: principal and interest. The principal is what you’re paying toward your loan balance. Your interest rate will determine how much you pay each month for that amount.
Interest rates vary based on the mortgage type, but higher interest rates generally mean higher monthly payments. (If you want to learn more about why check out How Interest Rates Work.) Private mortgage insurance works differently. You have to pay it every month regardless of whether or not you’ve made any progress paying down your loan balance.
As a result, it does not affect your interest rate—it just gets added to your total monthly payment. And as with any other part of your mortgage payment, if you don’t make at least one full installment every year, PMI can lead to foreclosure. If that happens, it’s unlikely that you’ll get all your money back—even if plenty’s still left on your home’s value! So what can help?
Final Thoughts on PMI Removal Calculator and it Uses
When it comes to your home, you need plenty of facts and figures to ensure you’re making a sound financial decision. A mortgage lender will want to know whether or not you have enough money for a down payment on your house, how much more debt than you can afford is already on your books, and even how many cars you currently own.
However, there’s one additional piece of information they may want from you: your monthly mortgage insurance premium (MIP). MIP is added onto an existing 30-year fixed-rate loan when consumers don’t put at least 20% down on their new home purchase.