PMI Cost Estimator
Determine your monthly and annual Private Mortgage Insurance premiums.
What is Private Mortgage Insurance (PMI)?
Private Mortgage Insurance, commonly known as PMI, is a type of insurance that conventional mortgage lenders require when a buyer puts down less than 20% of the home's purchase price. Contrary to common belief, PMI does not protect the homeowner; instead, it protects the lender in case the borrower defaults on the loan.
How is PMI Calculated?
The cost of PMI is generally calculated as a percentage of the total loan amount. Typical annual premiums range from 0.22% to 2.25% of the loan. Several factors influence your specific rate:
- Loan-to-Value (LTV) Ratio: The higher your loan amount relative to the home's value, the higher your risk and premium.
- Credit Score: Borrowers with higher credit scores typically receive significantly lower PMI rates.
- Loan Term: 30-year fixed mortgages may have different rates compared to 15-year or ARM products.
Example Calculation
If you purchase a home for $300,000 and provide an upfront payment of $15,000 (5%), your financed loan amount is $285,000. If your lender assigns an annual PMI rate of 0.75%, the math works as follows:
Annual Cost: $285,000 × 0.0075 = $2,137.50
Monthly Cost: $2,137.50 / 12 = $178.13
When Can You Stop Paying PMI?
Under the Homeowners Protection Act, you have the right to request PMI cancellation when your mortgage balance reaches 80% of the original value of your home. Lenders are legally required to automatically terminate PMI when your balance reaches 78%, provided you are current on payments.