Question

$200,000 house at 5.0% interest, 30 year loan, the LTV is 90%. Assume that the PMI has an upfront premium of 2% and an annual premium of 0.2%.

1. How much is the upfront PMI payment and how much is the monthly PMI payment?

2. How many months you have to pay PMI (when can you call your lender to request drop PMI payment)?

3. How many months your lender have to drop your PMI payment?

Answer 1

1) The upfront PMI payment is 2% of the loan amount. the loan amount is 90% of $ 200,000 which is $180,000.

Hence the upfront PMI payment would be $3600.

Monthly PMI would be 0.2% of the loan amount, which would be $360.

2) In order to request the lender to drop PMI, you should own atleast 20% of the equity of the home. Hence, we have to request when the principal amount owed to the bank would become $160000 or lesser. We would achieve this at the 79th month. Please refer to the table below for the calculation.

Month	Interest	Principal	Remaining Principal	Remaining / House price
1	750.00	216.28	179,783.72	0.899
2	749.10	217.18	179,566.54	0.898
3	748.19	218.09	179,348.46	0.897
4	747.29	218.99	179,129.46	0.896
5	746.37	219.91	178,909.56	0.895
6	745.46	220.82	178,688.73	0.893
7	744.54	221.74	178,466.99	0.892
8	743.61	222.67	178,244.32	0.891
9	742.68	223.59	178,020.73	0.890
10	741.75	224.53	177,796.20	0.889
11	740.82	225.46	177,570.74	0.888
12	739.88	226.40	177,344.34	0.887
13	738.93	227.34	177,117.00	0.886
14	737.99	228.29	176,888.71	0.884
15	737.04	229.24	176,659.46	0.883
16	736.08	230.20	176,429.27	0.882
17	735.12	231.16	176,198.11	0.881
18	734.16	232.12	175,965.99	0.880
19	733.19	233.09	175,732.90	0.879
20	732.22	234.06	175,498.84	0.877
21	731.25	235.03	175,263.81	0.876
22	730.27	236.01	175,027.80	0.875
23	729.28	237.00	174,790.80	0.874
24	728.30	237.98	174,552.82	0.873
25	727.30	238.98	174,313.84	0.872
26	726.31	239.97	174,073.87	0.870
27	725.31	240.97	173,832.90	0.869
28	724.30	241.98	173,590.92	0.868
29	723.30	242.98	173,347.94	0.867
30	722.28	244.00	173,103.94	0.866
31	721.27	245.01	172,858.93	0.864
32	720.25	246.03	172,612.90	0.863
33	719.22	247.06	172,365.84	0.862
34	718.19	248.09	172,117.75	0.861
35	717.16	249.12	171,868.63	0.859
36	716.12	250.16	171,618.47	0.858
37	715.08	251.20	171,367.27	0.857
38	714.03	252.25	171,115.02	0.856
39	712.98	253.30	170,861.72	0.854
40	711.92	254.36	170,607.37	0.853
41	710.86	255.41	170,351.95	0.852
42	709.80	256.48	170,095.47	0.850
43	708.73	257.55	169,837.92	0.849
44	707.66	258.62	169,579.30	0.848
45	706.58	259.70	169,319.60	0.847
46	705.50	260.78	169,058.82	0.845
47	704.41	261.87	168,796.96	0.844
48	703.32	262.96	168,534.00	0.843
49	702.22	264.05	168,269.94	0.841
50	701.12	265.15	168,004.79	0.840
51	700.02	266.26	167,738.53	0.839
52	698.91	267.37	167,471.16	0.837
53	697.80	268.48	167,202.68	0.836
54	696.68	269.60	166,933.08	0.835
55	695.55	270.72	166,662.35	0.833
56	694.43	271.85	166,390.50	0.832
57	693.29	272.99	166,117.52	0.831
58	692.16	274.12	165,843.39	0.829
59	691.01	275.26	165,568.13	0.828
60	689.87	276.41	165,291.72	0.826
61	688.72	277.56	165,014.15	0.825
62	687.56	278.72	164,735.43	0.824
63	686.40	279.88	164,455.55	0.822
64	685.23	281.05	164,174.51	0.821
65	684.06	282.22	163,892.29	0.819
66	682.88	283.39	163,608.89	0.818
67	681.70	284.58	163,324.32	0.817
68	680.52	285.76	163,038.56	0.815
69	679.33	286.95	162,751.61	0.814
70	678.13	288.15	162,463.46	0.812
71	676.93	289.35	162,174.11	0.811
72	675.73	290.55	161,883.56	0.809
73	674.51	291.76	161,591.79	0.808
74	673.30	292.98	161,298.81	0.806
75	672.08	294.20	161,004.61	0.805
76	670.85	295.43	160,709.19	0.804
77	669.62	296.66	160,412.53	0.802
78	668.39	297.89	160,114.64	0.801
79	667.14	299.13	159,815.50	0.799
80	665.90	300.38	159,515.12	0.798
81	664.65	301.63	159,213.49	0.796
82	663.39	302.89	158,910.60	0.795
83	662.13	304.15	158,606.45	0.793
84	660.86	305.42	158,301.03	0.792
85	659.59	306.69	157,994.34	0.790
86	658.31	307.97	157,686.37	0.788
87	657.03	309.25	157,377.11	0.787
88	655.74	310.54	157,066.57	0.785
89	654.44	311.83	156,754.74	0.784
90	653.14	313.13	156,441.60	0.782
91	651.84	314.44	156,127.17	0.781
92	650.53	315.75	155,811.42	0.779

3) The lender will have to drop the PMI when the remaining balance would drop down to 78% of the house price. Hence, as per the above table, we observe that the lender will have to stop payment at the 92nd month.