Excellent (740+)
Good (700-739)
Fair (680-699)
Poor (620-679)
Your estimated monthly PMI: $0.00
Understanding Private Mortgage Insurance (PMI)
Private Mortgage Insurance (PMI) is a type of mortgage insurance that is required by most lenders when you take out a conventional loan and your down payment is less than 20% of the home's purchase price. PMI protects the lender, not you, in case you default on your loan. This means if you stop making payments, the lender can make a claim to PMI to recoup some of their losses.
When is PMI Required?
For conventional loans, PMI is typically required if your Loan-to-Value (LTV) ratio is above 80%. The LTV is calculated by dividing the loan amount by the home's purchase price. For example, if you buy a home for $300,000 with a $60,000 down payment, your loan amount is $240,000. Your LTV would be ($240,000 / $300,000) * 100 = 80%. In this case, PMI might not be needed. However, if your down payment was only $30,000, your loan amount would be $270,000, and your LTV would be 90%, making PMI likely required.
How is PMI Cost Determined?
The cost of PMI is usually a percentage of the original loan amount, paid monthly. This percentage varies based on several factors, primarily:
Loan-to-Value (LTV) Ratio: A higher LTV (meaning a smaller down payment) generally results in a higher PMI premium.
Credit Score: Borrowers with higher credit scores are considered lower risk and typically pay lower PMI rates.
Loan Term: While less of a direct factor in the annual premium percentage, it influences the total amount paid over the life of the loan.
The annual PMI premium typically ranges from about 0.5% to 1.5% of the original loan amount. Lenders use specific rate sheets, often tied to borrower profiles, to determine the exact cost.
How the Calculator Works
Our PMI Cost Calculator provides an estimate based on the information you provide. The calculation follows these steps:
Calculate Loan Amount:Loan Amount = Home Purchase Price - Down Payment Amount
Calculate LTV Ratio:LTV Ratio = (Loan Amount / Home Purchase Price) * 100
Determine PMI Rate: Based on the LTV and the selected credit score, an estimated annual PMI rate percentage is assigned. The rates used are illustrative:
Excellent (740+): Typically 0.5% – 0.8% of the loan amount. We'll use 0.65% as an average.
Good (700-739): Typically 0.7% – 1.0%. We'll use 0.85%.
Fair (680-699): Typically 0.9% – 1.2%. We'll use 1.05%.
Poor (620-679): Typically 1.1% – 1.5%. We'll use 1.30%.
Note: Lenders have their own specific rate charts.
The calculator aims to give you a good ballpark figure for budgeting purposes.
When Can PMI Be Cancelled?
For most conventional loans, PMI can be cancelled once your LTV ratio reaches 78% (meaning you've paid down the loan to 78% of the original home value) or you have paid down the loan to 77% of the original value, assuming you are current on your mortgage payments. You can also request cancellation when you reach 80% LTV. For loans made after July 29, 1999, automatic cancellation is required by federal law when your LTV reaches 78% of the original value, provided you are current on payments.
It's crucial to understand PMI as it adds to your monthly housing costs. Using this calculator can help you estimate these costs and plan your finances accordingly when purchasing a home.
function calculatePmi() {
var homePrice = parseFloat(document.getElementById("homePrice").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var creditScore = parseFloat(document.getElementById("creditScore").value);
var loanTerm = parseFloat(document.getElementById("loanTerm").value); // Loan term isn't directly used in rate calculation but good to have for context
var resultText = document.getElementById("result").querySelector("span");
// Input validation
if (isNaN(homePrice) || homePrice <= 0) {
resultText.textContent = "Please enter a valid home price.";
return;
}
if (isNaN(downPayment) || downPayment = homePrice) {
resultText.textContent = "Down payment cannot exceed home price.";
return;
}
if (isNaN(loanTerm) || loanTerm 95) { // Very high LTV, lower credit score impact
if (creditScore >= 740) pmiRate = 1.30; // Higher end for very high LTV
else if (creditScore >= 700) pmiRate = 1.40;
else if (creditScore >= 680) pmiRate = 1.50;
else pmiRate = 1.55;
} else if (ltv > 90) { // High LTV
if (creditScore >= 740) pmiRate = 1.10;
else if (creditScore >= 700) pmiRate = 1.20;
else if (creditScore >= 680) pmiRate = 1.30;
else pmiRate = 1.40;
} else if (ltv > 85) { // Moderate-High LTV
if (creditScore >= 740) pmiRate = 0.90;
else if (creditScore >= 700) pmiRate = 1.00;
else if (creditScore >= 680) pmiRate = 1.15;
else pmiRate = 1.25;
} else if (ltv > 80) { // Standard LTV
if (creditScore >= 740) pmiRate = 0.65; // Excellent credit, standard LTV
else if (creditScore >= 700) pmiRate = 0.85; // Good credit
else if (creditScore >= 680) pmiRate = 1.05; // Fair credit
else pmiRate = 1.30; // Poor credit, standard LTV
} else {
// If LTV is 80% or less, PMI is typically not required for conventional loans.
// However, some specific loan programs might still have it or a lender might offer
// it as part of a package. For this calculator, we assume it's not needed.
resultText.textContent = "PMI typically not required for LTV 80% or less.";
return;
}
var annualPmiCost = loanAmount * (pmiRate / 100);
var monthlyPmiCost = annualPmiCost / 12;
resultText.textContent = "$" + monthlyPmiCost.toFixed(2);
}