How Is Primary Mortgage Insurance Calculated?

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Primary mortgage insurance is typically calculated by taking a number of different things into consideration. Find out about how primary mortgage insurance is calculated with help from a registered real estate broker in this free video clip.

Part of the Video Series: Real Estate Info
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Video Transcript

My name is Cathy McClellan. I'm Florida licensed real estate broker as well as a building contractor with Today's Homes in Panama City, Florida. Our topic for discussion today, is PMI, Primary Mortgage Insurance. If you're thinking about purchasing a home and you have not saved the 20 percent necessary for conventional mortgage. You're probably going to be charged PMI insurance. This is an insurance that's charged by the lender, to protect their position for that 20 percent. In case you get in trouble, they're still covered with this insurance. They calculate this PMI based on the amount of down payment that you actually do have. For instance, if you have a hundred thousand dollar home, and you only have ten thousand dollars to put down. They're going to calculate your PMI based on the ten thousand dollars that you don't have. They take that ten thousand dollars off, of the hundred thousand dollar loan, leaving a balance of a ninety thousand dollar mortgage balance. That is then multiplied by one-half of one percent, giving them the premium for your annual PMI. They divide that by twelve and they tack that onto your mortgage payment every single month. Until you've reached that 20 percent equity in your home, you're going to be required to carry this PMI insurance. I hope this information is helpful, this is Cathy McClellan, until next time.


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