Home Ownership Cost Calculator with PMI
Use this calculator to estimate your total monthly home ownership costs, including Private Mortgage Insurance (PMI), property taxes, and homeowner's insurance. Understanding these components is crucial for budgeting your home purchase.
Understanding Your Home Ownership Costs
Buying a home involves more than just the purchase price. Your monthly expenses will typically include several key components, which this calculator helps you estimate. Understanding each part is essential for responsible homeownership.
Private Mortgage Insurance (PMI)
Private Mortgage Insurance (PMI) is a type of insurance policy that protects the lender in case you default on your mortgage. It is typically required if your Buyer's Initial Cash Contribution (down payment) is less than 20% of the home's purchase price. PMI is usually paid monthly as part of your mortgage payment. The cost of PMI varies but is often between 0.3% and 1.5% of the original loan amount per year. Once you reach 20% equity in your home, you can usually request to have PMI removed, saving you a significant amount each month.
Principal & Interest (P&I)
This is the core of your mortgage payment. The principal is the amount you borrowed, and the interest is the cost of borrowing that money. Over the life of the loan, you'll pay back the principal plus the agreed-upon interest based on your Annual Cost of Borrowing and Loan Duration. In the early years of a mortgage, a larger portion of your payment goes towards interest, while later on, more goes towards paying down the principal.
Property Taxes
Property taxes are levied by local government authorities (county, city, school district) based on the assessed value of your home. These taxes fund local services like schools, roads, and emergency services. They are typically paid annually, but lenders often collect a portion of your annual property tax each month and hold it in an escrow account, paying the full amount on your behalf when due.
Homeowner's Insurance
Homeowner's insurance protects your home and belongings from damage due due to events like fire, theft, and natural disasters. It also provides liability coverage. Lenders require homeowner's insurance to protect their investment in your property. Like property taxes, the annual premium is often collected monthly by your lender and held in an escrow account.
How to Use the Calculator
Input the requested details about your potential home purchase. The calculator will then provide an estimated breakdown of your monthly costs, including the principal and interest, estimated PMI (if applicable), property taxes, and homeowner's insurance, giving you a clear picture of your total monthly financial commitment.