![]() In our example above, the purchaser made a down payment of only 18.2% of the total cost of the home, so the lender of the mortgage could require PMI payments until the borrower reaches an equity stake in the home of 20%, which is the same as a loan to value ratio of 80%. If the request is denied or never made, the payments will usually be stoped automatically by the lender when the loan to value ratio reaches 78%. ![]() In the United States, the borrower can generally ask to stop PMI payments when the loan to value ratio reaches 80%. Private mortgage insurance rates are typically 0.5% to 1.0% of the value of the mortgage. Private mortgage insurance, or PMI, is a type of insurance typically required by the mortgage lender when the borrower’s down payment on a home is less than 20% of the total cost of the home. This means that every month you will pay $3,328.60. The work to calculate monthly payments is shown below: The number of mortgage payments is 180, which is twelve payments per year for fifteen years. The annual mortgage rate is 4.0%, so the monthly rate is 4.0% divided by twelve. The present value here is $450,000, which is the value of the loan. We will use the ordinary annuity formula to calculate each monthly payment. The bank you are working with has offered you a fixed interest rate of 4.0% on a 15-year, $450,000 loan. Right now, you only have enough saved to be able to make a down payment of $100,000. Suppose you wish to acquire a home that costs $550,000.
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