Mortgage Payment Formula:
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Definition: This calculator estimates mortgage payments including principal, interest, and PMI (Private Mortgage Insurance), with the option to include extra payments to reduce the loan term.
Purpose: It helps homebuyers understand their full monthly payment and how extra payments can shorten the loan term and reduce total interest.
The calculator uses the formula:
Where:
Explanation: The calculator first determines the base P&I payment using standard amortization formulas, adds PMI, then shows the impact of extra payments on payoff time.
Details: PMI is typically required for loans with less than 20% down payment. Extra payments directly reduce principal, shortening the loan term and saving thousands in interest.
Tips: Enter the loan amount, interest rate, loan term, PMI rate (typically 0.3%-1.5%), and any planned extra monthly payment.
Q1: When is PMI required?
A: PMI is typically required when your down payment is less than 20% of the home's value.
Q2: How can I remove PMI?
A: PMI can usually be removed when you reach 20% equity, either through payments or home value appreciation.
Q3: How do extra payments affect my loan?
A: Extra payments reduce principal faster, shortening the loan term and reducing total interest paid.
Q4: What's a typical PMI rate?
A: PMI rates typically range from 0.3% to 1.5% of the loan amount annually, depending on credit and LTV.
Q5: Should I pay PMI or make a larger down payment?
A: If possible, a 20% down payment avoids PMI, but paying PMI may allow earlier homeownership with proper budgeting.