Private Mortgage Insurance (PMI) is a type of mortgage insurance that protects the mortgage lender if a borrower defaults on their mortgage loan. It is typically required by lenders when a borrower makes a down payment of less than 20% of the home's purchase price on a conventional loan. The cost of PMI can vary significantly based on several factors, including your credit score, the loan-to-value (LTV) ratio, and the loan amount.
How PMI is Calculated
While there isn't a single, universal formula for PMI, lenders and private mortgage insurers generally estimate PMI costs as a percentage of the total loan amount. This percentage is influenced by risk factors, with lower risk (higher credit scores, lower LTV) resulting in lower PMI premiums. The annual PMI premium is then typically divided into monthly payments and added to your total mortgage payment.
A common way to estimate PMI cost is using the following approach, which considers the factors you input into our calculator:
Loan-to-Value (LTV) Ratio: This is the ratio of the loan amount to the appraised value of the home. A higher LTV means higher risk for the lender.
Credit Score: A higher credit score indicates a lower risk of default, leading to potentially lower PMI rates.
Loan Amount: The total amount borrowed directly impacts the overall PMI premium, as it's a percentage of this amount.
PMI Rate Ranges (Estimates)
The annual PMI rate typically falls between 0.5% and 1.5% of the loan amount. The exact rate depends on the underwriter's assessment of risk:
Excellent Credit (740+): 0.5% – 0.75%
Good Credit (680 – 739): 0.75% – 1.15%
Fair Credit (620 – 679): 1.15% – 1.50%
Note: This calculator provides an *estimate*. Actual PMI rates may vary by lender and individual circumstances.
When Can You Cancel PMI?
Once your LTV ratio reaches 80%, you can request your lender to cancel PMI. By law, lenders must automatically terminate PMI when your LTV reaches 78% (or 77% in some cases) of the original appraised value, provided you are current on your mortgage payments.
Why Use This Calculator?
This calculator helps you:
Estimate your potential monthly PMI costs before you apply for a mortgage.
Understand how your credit score and down payment (reflected in LTV) impact PMI.
Budget more accurately for your homeownership expenses.
function calculatePMI() {
var loanAmount = parseFloat(document.getElementById("loanAmount").value);
var ltvRatio = parseFloat(document.getElementById("ltvRatio").value);
var creditScore = parseFloat(document.getElementById("creditScore").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = "–"; // Reset previous result
if (isNaN(loanAmount) || loanAmount <= 0) {
resultDiv.innerHTML = "Please enter a valid loan amount.";
return;
}
if (isNaN(ltvRatio) || ltvRatio 100) {
resultDiv.innerHTML = "Please enter a valid LTV ratio (1-100%).";
return;
}
if (isNaN(creditScore) || creditScore = 740 && ltvRatio = 700 && ltvRatio = 680 && ltvRatio <= 97) {
annualPMIRate = 0.0115; // 1.15% for fair credit
} else {
annualPMIRate = 0.0130; // Higher rate for lower scores or very high LTV
}
// Calculate annual PMI cost
var annualPMICost = loanAmount * annualPMIRate;
// Calculate monthly PMI cost
var monthlyPMICost = annualPMICost / 12;
// Display the result
resultDiv.innerHTML = "$" + monthlyPMICost.toFixed(2) + " Estimated Monthly PMI";
}