Remove Pmi Calculator

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Reviewed and Vetted by: David Chen, CFA.
Use this calculator to determine your eligibility for Private Mortgage Insurance (PMI) cancellation. PMI is typically required on conventional loans when the down payment is less than 20% of the home’s value. Removing it can significantly lower your monthly housing expenses.

Remove PMI Calculator

Potential Annual Savings

Detailed Calculation Steps

Remove PMI Calculator Formula

LTV_{Original} = \frac{\text{Current Principal Balance}}{\text{Original Home Value}} \times 100\%

LTV_{Current} = \frac{\text{Current Principal Balance}}{\text{Current Estimated Home Value}} \times 100\%

\text{Annual Savings} = \text{Monthly PMI Payment} \times 12
Formula Sources: CFPB, Investopedia

Variables

  • Original Home Value: The price you paid for the home, or its appraised value at the time of purchase.
  • Original Loan Amount: The initial amount borrowed from the lender.
  • Current Principal Balance: The outstanding amount you still owe on the mortgage.
  • Monthly PMI Payment: The exact amount of your monthly Private Mortgage Insurance premium.
  • Current Estimated Home Value: An up-to-date estimate (e.g., from a formal appraisal or BPO) used for borrower-requested removal.

Related Calculators

What is Private Mortgage Insurance (PMI)?

PMI is a type of insurance policy designed to protect the mortgage lender in case the borrower defaults on the loan. It is required under the federal Homeowners Protection Act (HPA) for most conventional mortgages when the borrower puts down less than 20% of the home’s purchase price. This insurance cost is added to your monthly mortgage payment and does not benefit the borrower directly; it is solely for the lender’s protection.

The good news is that PMI is not permanent. Once you build up sufficient equity in your home, you can request or automatically receive cancellation of the coverage. Removing PMI can free up hundreds of dollars per month in your budget, making this calculation crucial for homeowners.

How to Calculate PMI Eligibility (Example)

  1. Determine LTV (Original Value): Divide the Current Principal Balance ($240,000) by the Original Home Value ($300,000). $240,000 / $300,000 = 0.80 or 80%.
  2. Check for Borrower Requested Removal: Since the LTV is 80%, the borrower can request cancellation, provided they have a good payment history and a current appraisal supporting the value.
  3. Check for Automatic Termination: If the current LTV was 78% or less (e.g., if the balance was $234,000), the lender must automatically cancel the PMI according to HPA guidelines, even without a request.
  4. Calculate Savings: If the PMI is removed, the borrower saves the monthly premium ($150) multiplied by 12 months, resulting in $1,800 annual savings.

Frequently Asked Questions (FAQ)

Q: How do I request PMI removal?

A: Once your loan-to-value (LTV) ratio reaches 80% of the original purchase price or appraised value, you can typically send a written request to your lender asking for PMI cancellation. You may be required to get a new appraisal at your expense.

Q: Does the automatic termination rule apply to all loans?

A: The Homeowners Protection Act (HPA) automatic termination at 78% LTV of the original value applies to most conventional mortgages signed on or after July 29, 1999. FHA and VA loans have different rules.

Q: Can my PMI be cancelled based on increased home value?

A: Yes, if your home value has increased, you can request cancellation when the LTV reaches 80% of the current appraised value. The property must be formally reappraised by the lender.

Q: What if I have a high-risk loan?

A: Some lenders may deny a cancellation request if you have a second mortgage (like a HELOC) or a poor payment history. Always check your specific loan documents.

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