The presence of private mortgage insurance, PMI, (which is similar to the extra fees shown above) can play a big role in the affordability of housing. This payment is normally made until you meet a certain threshold. Suppose that the Anderson family bought a house with zero down as part of their mortgage agreement; they need to pay an extra $75 per month until they have paid off 20% of the principal of their home. They bought a $180,000 house on a 30-year mortgage at an interest rate of 13%. Using this information, their monthly payment would be $1,991.16 without the extra fee.
How long will it take the Andersons to pay off the first 20% of their house?
How much will they have paid in PMI fees in this time?
How much interest will the Andersons end up paying over the life of this loan?
What is the total amount the Andersons paid for their $180,000 home?