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Pay For Mortgage Insurance or Pay a Higher Interest Rate
The Mortgage Professor's Calculators
Pay For Mortgage Insurance or Pay a Higher Interest Rate
Who This Calculator is For: Borrowers trying to decide whether they should elect to pay mortgage insurance on a fixed-rate mortgage, or avoid mortgage insurance by paying a higher interest rate.
What This Calculator Does: This calculator compares the after-tax interest cost of a fixed-rate mortgage on which the borrower pays for mortgage insurance with that of a higher interest rate mortgage on which mortgage insurance is avoided.
Enter the Following Information:
Is This Loan for the Purchase of a Property or a Refinance?
Purchase
Refinance
Loan Term (in years)
30 years
25 years
20 years
15 years
Income Tax Bracket ( e.g. 25.5 )
How Long Do You Expect to Stay in Your House, in Years?
The Earliest You Might Move (e.g. 3)
Your Best Guess (e.g. 7)
The Latest You Might Move (e.g. 30)
Optional: Expected Rate of Property Value Appreciation
What Do You Expect Your Down Payment to Be?
5%
10%
15%
20% or More
Mortgage Insurance
Higher Interest Rate
Mortgage Insurance (Monthly Premium Plan)
Interest Rate (e.g. 7.50)
Points (e.g. 1.5)
DO NOT USE DOLLAR SIGNS ($), COMMAS (,) PLUS OR MINUS SIGNS ( + / - ) OR PERCENTAGE SIGNS (%) IN ANY INPUT BOXES
Read What the Mortgage Professor Has to Say About Whether It Makes Sense to Pay a Higher Interest Rate in Order to Avoid Mortgage Insurance
Design & Programming by
The current tax rates are: 15%, 25.5%, 30.5%, 33.5%, and 39.1%. To perform a "pre-tax" analysis enter zero (0) as the tax rate. You may combine Federal and State tax rates if you wish.
This affects the after-tax analysis because on a purchase transaction points are fully deductible in the first year whereas on a refinance the deduction must be spread over the life of the loan.
Interest cost may change with the length of time you stay with the mortgage.
Down payment as a percent of sale price or property value, whichever is lower.
If you enter a value, mortgage insurance will be terminated when the loan balance equals 80% of the appreciated value of the property.
Given the down payment and term you have selected, the numbers shown are typical annual premium rates for "monthly premium plans" that involve no upfront premium. You can override these numbers if you are quoted different rates for monthly premium plans.
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Private Mortgage Insurance
What is Private Mortgage Insurance
Private mortgage insurance (PMI) is a policy that
protects lenders who make loans to individuals who want to buy or
refinance a home, but are unable to come up with the required 20%
down payment.
Private Mortgage Insurance Facts:
PMI plays a valuable role in expanding home ownership.
With PMI, families can purchase homes with as
little as 3-to-5 percent down payment on a home.
Nearly 1 million people a year buy or refinance a
home with PMI.
PMI cost home owners between $20 to $100 per month.
PMI can be canceled, under certain conditions, when
a good payment history is met and 20% or more equity is achieved on
the cost of the home.
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