Determine your annual Mortgage Insurance percentage
Effective Annual MI Rate:0.00%
Total Annual Cost:$0.00
Cost per $100k Borrowed:$0.00
function calculateMIRate() {
// 1. Get input values
var loanBalance = parseFloat(document.getElementById('miLoanBalance').value);
var monthlyCost = parseFloat(document.getElementById('miMonthlyCost').value);
var resultDiv = document.getElementById('miResults');
// 2. Validate inputs
if (isNaN(loanBalance) || isNaN(monthlyCost) || loanBalance <= 0 || monthlyCost < 0) {
alert("Please enter valid positive numbers for the Loan Balance and Monthly Premium.");
resultDiv.style.display = 'none';
return;
}
// 3. Perform Calculations
// Annual Cost = Monthly * 12
var annualCost = monthlyCost * 12;
// Rate = (Annual Cost / Loan Balance) * 100
var effectiveRate = (annualCost / loanBalance) * 100;
// Factor per 100k
var costPer100k = (monthlyCost / loanBalance) * 100000;
// 4. Update UI with Results
document.getElementById('resultRate').innerHTML = effectiveRate.toFixed(3) + '%';
document.getElementById('resultAnnualCost').innerHTML = '$' + annualCost.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resultCostPer100k').innerHTML = '$' + costPer100k.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2}) + ' / mo';
// 5. Show Results
resultDiv.style.display = 'block';
}
Understanding Your MI Rate
The MI Rate (Mortgage Insurance Rate) is a critical factor in the total cost of borrowing for homeowners who put down less than 20% on a home purchase. While many borrowers focus solely on the monthly dollar amount, calculating the effective annual percentage rate allows for a clearer comparison against other loan products and interest rates.
What determines the MI Rate?
Unlike mortgage interest rates, which are primarily driven by market yields, Private Mortgage Insurance (PMI) rates are risk-based premiums determined by insurance providers. Several "physics" of finance dictate this rate:
Loan-to-Value (LTV) Ratio: The higher the LTV (e.g., 97% vs 90%), the higher the risk for the lender, resulting in a higher MI rate factor.
Credit Score: Borrowers with higher credit scores (760+) typically secure significantly lower MI rates compared to those with lower scores, even with the same loan amount.
Loan Term: Longer terms (30-year vs 15-year) often carry higher premiums due to the extended period of risk exposure.
Why Calculate the Effective Percentage?
Lenders often present Mortgage Insurance as a simple monthly fee (e.g., "$150/month"). However, converting this to an annual percentage rate helps you understand the true cost of capital. For example, if you are paying an MI rate of 0.85% on top of a mortgage interest rate of 6.5%, your effective cost of borrowing on the principal balance is 7.35%.
PMI vs. FHA MIP Rates
It is important to distinguish between Private Mortgage Insurance (PMI) for conventional loans and Mortgage Insurance Premiums (MIP) for FHA loans:
Conventional PMI: Rates vary dynamically based on credit and equity. They typically range from 0.2% to 2.0% annually.
FHA MIP: These rates are generally fixed (often 0.55% for most new loans as of 2023/2024) regardless of credit score, provided the term and LTV meet certain criteria.
How to Lower Your MI Rate
Since the MI rate is a function of risk, you can lower it by reducing the lender's perceived risk. This can be achieved by improving your credit score before applying, increasing your initial equity position to lower the LTV, or opting for a shorter loan term. Additionally, once your loan balance drops to 80% of the home's original value, you can request to cancel conventional PMI, effectively bringing your MI rate to 0%.