Melanie wants to purchase a $258940 home, but can only afford a 5% down payment. The bank approves her private mortgage insurance(PMI) at a premium of 0.89%. what is Melanie’s monthly PMI Payment?
To calculate Melanie's monthly PMI payment, you need to first find out the loan amount, as the down payment will be subtracted from the total home cost.
1. Calculate the down payment amount:
Down payment = 5% of the home cost
Down payment = 5/100 * $258,940
2. Calculate the loan amount:
Loan amount = Home cost - Down payment
3. Calculate the PMI premium:
PMI premium = 0.89% of the loan amount
PMI premium = (0.89/100) * Loan amount
4. Calculate Melanie's monthly PMI payment:
Monthly PMI payment = PMI premium / 12 (as there are 12 months in a year)
Now, let's follow these steps to find the exact value of Melanie's monthly PMI payment.
1. Calculate the down payment:
Down payment = 5/100 * $258,940
= 0.05 * $258,940
= $12,947
2. Calculate the loan amount:
Loan amount = $258,940 - $12,947
= $245,993
3. Calculate the PMI premium:
PMI premium = (0.89/100) * $245,993
= $2,189.45 (rounded to 2 decimal places)
4. Calculate the monthly PMI payment:
Monthly PMI payment = $2,189.45 / 12
≈ $182.45 (rounded to 2 decimal places)
So, Melanie's monthly PMI payment is approximately $182.45.