function calculatePMI() {
var homePrice = parseFloat(document.getElementById('homePrice').value);
var downPayment = parseFloat(document.getElementById('downPayment').value);
var pmiRate = parseFloat(document.getElementById('pmiRate').value);
var loanAmountResult = document.getElementById('loanAmountResult');
var ltvResult = document.getElementById('ltvResult');
var annualPmiResult = document.getElementById('annualPmiResult');
var monthlyPmiResult = document.getElementById('monthlyPmiResult');
var pmiWarning = document.getElementById('pmiWarning');
pmiWarning.innerHTML = "; // Clear previous warnings
if (isNaN(homePrice) || homePrice <= 0) {
pmiWarning.innerHTML = 'Please enter a valid Home Purchase Price.';
loanAmountResult.innerHTML = 'Total Loan Amount: $0.00′;
ltvResult.innerHTML = 'Loan-to-Value (LTV) Ratio: 0.00%';
annualPmiResult.innerHTML = 'Estimated Annual PMI Cost: $0.00′;
monthlyPmiResult.innerHTML = 'Estimated Monthly PMI Payment: $0.00′;
return;
}
if (isNaN(downPayment) || downPayment homePrice) {
pmiWarning.innerHTML = 'Please enter a valid Down Payment Amount (cannot exceed Home Price).';
loanAmountResult.innerHTML = 'Total Loan Amount: $0.00′;
ltvResult.innerHTML = 'Loan-to-Value (LTV) Ratio: 0.00%';
annualPmiResult.innerHTML = 'Estimated Annual PMI Cost: $0.00′;
monthlyPmiResult.innerHTML = 'Estimated Monthly PMI Payment: $0.00′;
return;
}
if (isNaN(pmiRate) || pmiRate < 0) {
pmiWarning.innerHTML = 'Please enter a valid Annual PMI Rate (cannot be negative).';
loanAmountResult.innerHTML = 'Total Loan Amount: $0.00′;
ltvResult.innerHTML = 'Loan-to-Value (LTV) Ratio: 0.00%';
annualPmiResult.innerHTML = 'Estimated Annual PMI Cost: $0.00′;
monthlyPmiResult.innerHTML = 'Estimated Monthly PMI Payment: $0.00′;
return;
}
var loanAmount = homePrice – downPayment;
var ltv = (loanAmount / homePrice) * 100;
var annualPmiCost = loanAmount * (pmiRate / 100);
var monthlyPmiPayment = annualPmiCost / 12;
loanAmountResult.innerHTML = 'Total Loan Amount: $' + loanAmount.toFixed(2);
ltvResult.innerHTML = 'Loan-to-Value (LTV) Ratio: ' + ltv.toFixed(2) + '%';
annualPmiResult.innerHTML = 'Estimated Annual PMI Cost: $' + annualPmiCost.toFixed(2);
monthlyPmiResult.innerHTML = 'Estimated Monthly PMI Payment: $' + monthlyPmiPayment.toFixed(2);
if (ltv <= 80) {
pmiWarning.innerHTML = 'Note: With an LTV of ' + ltv.toFixed(2) + '%, Private Mortgage Insurance (PMI) is typically not required for conventional loans. Your calculated PMI is based on the rate you provided, but you might not need to pay it.';
} else if (pmiRate === 0) {
pmiWarning.innerHTML = 'Note: You have entered a 0% PMI rate. If your LTV is above 80%, PMI is usually required. Please verify your PMI rate.';
}
}
// Run calculation on page load with default values
window.onload = calculatePMI;
Understanding Private Mortgage Insurance (PMI)
Private Mortgage Insurance (PMI) is a type of insurance policy that protects mortgage lenders from the risk of default when a borrower makes a down payment of less than 20% of the home's purchase price. While it protects the lender, it's typically paid by the borrower and added to their monthly mortgage payment.
Why is PMI Required?
Lenders consider loans with a low down payment (meaning a high Loan-to-Value or LTV ratio) to be riskier. If a borrower defaults on their mortgage, the lender might not recover the full loan amount through foreclosure if the home's value has declined. PMI mitigates this risk for the lender, making it possible for more people to purchase homes with smaller upfront payments.
How is PMI Calculated?
PMI is usually calculated as an annual percentage of the original loan amount. This annual percentage can range from about 0.3% to 1.5% (or sometimes higher) depending on several factors, including:
Loan-to-Value (LTV) Ratio: The higher your LTV (i.e., the smaller your down payment), the higher your PMI rate will likely be.
Credit Score: Borrowers with higher credit scores typically qualify for lower PMI rates.
Loan Type and Term: The specific mortgage product and its term (e.g., 15-year vs. 30-year fixed) can also influence the rate.
Once the annual PMI cost is determined, it's typically divided by 12 and added to your monthly mortgage payment.
Example Calculation:
Let's say you're buying a home for $350,000 with a 10% down payment and an annual PMI rate of 0.75%.
In this scenario, you would pay an additional $196.88 each month for PMI.
How to Avoid or Remove PMI
The most common way to avoid PMI is to make a down payment of 20% or more. If you already have PMI, you can typically request its cancellation once your loan-to-value (LTV) ratio reaches 80% (meaning you have 20% equity in your home). Lenders are also legally required to automatically cancel PMI once your LTV reaches 78% of the original home value, provided you are current on your payments.
Refinancing your mortgage to a new loan with an LTV of 80% or less is another way to eliminate PMI.