When you are looking into purchasing real estate, one of the main finance related questions you should be asking is ‘How much would my mortgage payments be with PMI?’ The answer to this will often determine the timing of level of your purchasing power. The reason being that PMI (or private mortgage insurance) can be quite expensive, and this cost can be a great reason to either get creative with your finance options or purchase at a lower price.
How much would my mortgage payments be with PMI?
To work out exactly how much your monthly payments are going to be with PMI you will be best to go to a lender and obtain a quote. Having said that, to give you a general indication of the expense you can expect, make a simple calculation. Keep in mind that there is no one answer to the question of how much is mortgage insurance: however…
The annual cost of PMI is generally around 1% of the total loan amount. So to use an example, on a $200,000 loan, the annual PMI would cost $2,000, breaking it down further, the monthly cost of PMI would be approximately $166.67. Don’t take these figures as gospel though – they are a general indication only. You will want definitive figures when working out how much would a mortgage payment be with and without PMI.
Calculating PMI into your monthly payment figure is a smart way to approach planning for your property purchases. It just makes sense to approach real estate transactions with your eyes wide open, as any surprises are likely to be a little nasty (and costly). Having talked about PMI to such a degree though, it would be remiss not to talk about how to avoide having to pay PMI altogether.
Most lenders will require a borrower to take out private mortgage insurance on a loan if you are looking to borrow an amount which is 80% or more of the value of the property. So your options are to either purchase a property at a price which fits the amount of cash deposit you have available, or you can find another way to get the extra money you require for the remainder of the loan. Many people obtain finance for their home loan either through an unsecured personal loan or through other means such as credit card advances.
Of course this will involve a higher cost in the short term but at least they do not have to take out PMI. The first step though is to find out exactly how much is PMI on the loan you are looking into – and then making a few calculations to see if it is feasible to try and avoid it – or just to accept and pay it. If you wonder ‘how much would my mortgage be if…’ – then don’t. Use a simple to use and free mortgage calculator and find out for sure. There are lines of finance that specialize in these loans, often called second mortgages, and it is well worth your while to look into your options and start calculating your savings!