Question

If you buy a home with less than 20% down, you will pay an additional monthly fee, PMI (private mortgage insurance), until you reach 80% equity. Keep track of when you reach 80% equity so you can request to have your PMI removed. Ken Buckmiller’s home recently appraised at $292,000. His mortgage was for $277,000 at 5% for 30 years with PMI of $249.17 per month. What is his monthly payment plus PMI? His mortgage balance is currently $170,500. Has he reached 80% equity? (Use Table 15.1.) (Do not round intermediate calculations. Round your answer to the nearest cent.)

Answer 1

Monthly payment =	(P*R*(1+R)^N)/((1+R)^N-1)
a P*R	(277000)*(.05/12) =	1154.17
b (1+R)^N	((1+(0.05/12))^360)	4.4677
c (1+R)^N-1	((1+(0.05/12))^360)-1	3.4677
d b/c	4.4677/3.4677	1.2884
e a*e	1154.17*1.2884	1487.03
N = 12*30 = 360
P = 277000
R = Monthly interest rate = .05/12
Additional monthly fee =	$249.17
Monthly payment =	$1487.03
Total monthly payment =	$249.17+ $1487.03 = $1736.2
Mortgage value / market value of home =	170500/292000
	58.39%
Current mortgage value balance is 170500 which is 58.39% of market value of home.
It describes that now the equity value is 41.61 which is higher than 20% equity
requirement so it could be better to removed additional fee of $249.17