Use this Private Mortgage Insurance (PMI) Cost Calculator to quickly estimate your monthly and annual PMI expenses based on your loan amount and the annual PMI rate provided by your lender.
PMI Insurance Cost Calculator
Detailed Calculation Steps
Input Variables:
- Loan Amount:
- PMI Rate:
Step 1: Calculate Annual PMI Cost
Step 2: Calculate Monthly PMI Payment
Result Summary:
PMI Insurance Cost Formula
Variables Explained
The calculator uses the following key variables:
- Total Loan Amount: The principal balance of your mortgage loan used to calculate the insurance premium.
- Annual PMI Rate (%): The yearly percentage rate charged by your mortgage insurer. This rate typically ranges from 0.5% to 1.5%, depending on your credit score and loan-to-value (LTV) ratio.
- Monthly PMI Payment: The final amount added to your monthly mortgage bill to cover the insurance premium.
Related Calculators
What is Private Mortgage Insurance (PMI)?
Private Mortgage Insurance (PMI) is a type of mortgage insurance you may be required to pay if you have a conventional loan and make a down payment of less than 20% of the home’s purchase price. It protects the lender—not you—if you stop making payments on your loan.
Lenders generally require PMI because a smaller down payment signals a higher risk. Once your loan-to-value (LTV) ratio reaches 80% (meaning you have 20% equity in the home), you can typically request to have PMI removed. Lenders are legally required to automatically cancel PMI when your LTV ratio reaches 78% (or the halfway point of your loan term).
How to Calculate Monthly PMI (Example)
Let’s calculate the Monthly PMI for a loan of $350,000 with a 0.8% annual PMI rate:
- Determine Annual PMI Rate in Decimal: Divide the rate by 100. $$ 0.8\% / 100 = 0.008 $$
- Calculate Annual PMI Cost: Multiply the Loan Amount by the decimal rate. $$ \$350,000 \times 0.008 = \$2,800 $$
- Calculate Monthly PMI Payment: Divide the Annual PMI Cost by 12. $$ \$2,800 / 12 = \$233.33 $$
The estimated monthly PMI payment is $233.33.
Frequently Asked Questions (FAQ)
Q: How do I know my annual PMI rate?
A: Your annual PMI rate is determined by your lender and depends primarily on your credit score, the loan-to-value (LTV) ratio, and the type of loan. This rate is disclosed in your loan estimate and final closing documents.
Q: Can I avoid paying PMI?
A: Yes. The most common way to avoid PMI is to make a down payment of 20% or more of the home’s purchase price. For example, on a $400,000 home, a $80,000 down payment would avoid PMI.
Q: Does PMI protect me or the lender?
A: PMI explicitly protects the lender. It compensates the lender if you default on your mortgage. It provides no financial protection to the borrower.
Q: When can I cancel my PMI?
A: You can typically request cancellation of PMI when your loan balance reaches 80% of the original home value. It will be automatically terminated when the balance reaches 78% of the original home value, provided you are current on your payments.