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For example, if your pre-tax monthly income is $8,000 and your mortgage payment is $2,000, you have a front-end ratio of 25% (meaning that your mortgage consumes 25% of your income).
Assuming a 30-year fixed-rate mortgage at 6.5% interest, including estimated property taxes and insurance, the payment on a $400,000 mortgage would be around $2,857 a month.
In real estate, the term is commonly used by banks and building societies to represent the ratio of the first mortgage line as a percentage of the total appraised value of real property. For instance, if someone borrows $130,000 to purchase a house worth $150,000, the LTV ratio is $130,000 to 150,000 or $130,000 / $150,000 , or 87%.
Mortgage calculators can be used to answer such questions as: If one borrows $250,000 at a 7% annual interest rate and pays the loan back over thirty years, with $3,000 annual property tax payment, $1,500 annual property insurance cost and 0.5% annual private mortgage insurance payment, what will the monthly payment be? The answer is $2,142.42.
There is also a monthly mortgage insurance premium (MIP) which varies based on the amortization term and loan-to-value ratio. [31] FHA mortgage insurance premium (MIP) can be removed in two cases: first, if the initial loan-to-value ratio was less than or equal to 90%, second, if the FHA loan is refinanced. [32]
Debt-to-income ratio below 43%. ... also pay an annual 0.5% mortgage insurance premium on your outstanding mortgage balance, which accrues each year and is payable when the loan is repaid in full ...