How do lenders calculate PMI? Will you need PMI to refinance or is it just for buying a house? How much will your private mortgage insurance cost?
During your refinance, you'll receive a home appraisal performed by a licensed real estate appraiser to determine the current market value of your home.
Consider this. You purchased a home for $250,000. Although you originally put down 20%, your home has fallen in value following a recession. Now it's time to refinance. Expect lenders to require PMI.
Conversely, a home buyer with a 15% down payment refinances a few years later. The appraisal demonstrates 20% equity. Financing proceeds without PMI.
For home purchases, PMI calculation is based on the lesser of the sales price and appraised value.
For example, if you are buying a house that costs $250,000, a 20% down payment would equal $50,000. Any less and you will be required to purchase PMI.
The cost of your PMI premium varies based on loan amount. In general, percentages between .5 to 1.25 can be expected. Translated, PMI on $100,000 could add between $41 and $104 to monthly house payments.
Credit history, amount of down payment or equity, occupancy status, and loan type contribute to calculations so consult a lender for a personalized quote based on individual circumstances.
By the way, go here if find yourself wondering What Is PMI!
Traditionally, home buyers have been opposed to PMI since it was tedious to cancel. Discover how to get rid of PMI.
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As promised, the question I received from BigBear that inspired this page is found at PMI Calculation Questions.
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