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Mortgage Calculator Insurance - Mortgage Calculators that Calculate Insurance

yearly mortgage insurance

It doesn’t make sense to calculate your mortgage without adding in the other amounts that you must pay monthly. These other charges are mainly taxes and insurance. In fact, there is a rule of thumb type acronym – PITI- for Principal, Interests, Taxes, Insurance – that is used to indicate this monthly lump sum. Real estate investors and ordinary home owners alike need to know how much it will cost them monthly to own a house, and calculating the PITI gives them a good idea of what that expense will be.
Mortgage lenders usually require homeowners to have home insurance to protect their investment in the homeowner’s property. That is, if A house burns down or gets badly damaged beyond the means of the homeowner to repair or rebuild, and the home owner has too many other obligations to repay the loan, the lender could be left with a worthless asset. They could end up being unable to foreclose the house and sell it at auction or to another buyer. If, however, the honmeowner has home insurance, many repairs are covered and the house can be brought back to resale value. This is what makes insurance such a ubiquitous item and part of the PITI monthly estimate. Insurance protects homeowners and lenders alike. It covers things like accidental damage, break-ins, theft of items from the house, and liabilities.
There is also another type of insurance that can be included in the monthly costs, and that is mortgage insurance. This insurance usually protects the lender, though it may also be taken out by a real estate investor. It covers a certain amount of the loss in case the mortgage borrower defaults on it. Often the lender requires a borrower with limited equity to purchase this type of insurance. Thus, the homeowner/investor must include this premium in the monthly PITI.
This all being the case, it is important to find a mortgage calculator that calculates insurance costs along with the other parts of the PITI. Mortgage calculators come in all shapes and sizes. Many of them are free and can be found online at various sites. Some of these calculators only calculate homeowners’ insurance as part of the overall monthly amount, so it is important to find calculators that also include mortgage insurance if that is relevant to a homeowner’s situation.
Here is a sample of the way a typical mortgage calculator that calculates both insurance types works. There are boxes into which to enter the following items:
Years
This is the term of the mortgage. Mortgage terms can vary greatly, often from 5 years to as much as 30. This directly affects the amount that will have to be paid every month and the amount of interest that will accrue. So the calculator needs this data to arrive at the right figure.

Interest rate
This is usually APR – Annual Percentage Rate. The calculator uses this to calculate the percentage of the principal that will be owed each year as interest. Again, the longer the term, the more interest will accrue.

Loan Amount
This is the principal – the amount of the loan itself. This will be broken up into monthly payments by the calculator and factored into the final PITI figure.

Yearly Tax
This is the amount per year that must be paid in property tax. This too is broken up into monthly payments for the length of the loan term and added to the PITI.

Yearly Homeowners Insurance
This is the homeowners insurance that most home buyers have. This may or may not be in addition to mortgage insurance. Either way it is added into the monthly PITI figure.

Yearly Mortgage Insurance

This is the mortgage insurance referred to above. A homeowner may or may not be required to buy this kind of insurance. It insures the lender or a middle man against a homeowner defaulting on their mortgage.

Total PITI Payment
All of these yearly figures are tallied up and divided by the number of months in the term of the mortgage. The result is the monthly PITI figure. This figure is the monthly cost required to maintain ownership of a house or other piece of real estate. These are sometimes known as “holding costs.” If this figure seems like something a homeowner or investor can afford, then it may be a wise move to buy the house. If not, then they should probably continue looking. This figure is also a good guide as to whether the house will fetch a good price for resale. The house generally must accrue in value for a profit to be possible. The resale value must not only be over and above the initial sale price/mortgage, but also must offset the PITI overall for the time period the house is owned. This can be mitigated of course by income the house generates, such as rent.

It is easy to find fairly good mortgage calculators on line – ones that include the two types of insurance along with the other PITI charges. Mortgage calculators are a good way to help make the cost of buying and maintaining a property clear, convenient, and straightforward.

Mortgage Calculator Taxes - Finding a Good Mortgage Calculator That Calculates Taxes [next] [back] Mortgage Bank Rate - How a Bank Determines Mortgage Rates

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