PMI Calculator
Calculate your private mortgage insurance (PMI) payment, loan-to-value ratio, and when PMI can be removed.
Understanding Private Mortgage Insurance (PMI)
Private Mortgage Insurance (PMI) is a type of mortgage insurance that conventional mortgage borrowers are required to pay if they make a down payment of less than 20 percent of the home purchase price. PMI protects the lender in case the borrower defaults on their loan payments.
How PMI is Calculated
PMI rates typically range from 0.2 percent to 2.0 percent of the original loan balance annually, depending on credit score, loan-to-value (LTV) ratio, and loan term. The annual PMI premium is divided into 12 equal monthly payments added to your regular mortgage payment.
The Loan-to-Value ratio is calculated as:
$$\text{LTV Ratio} = \left( \frac{\text{Loan Amount}}{\text{Home Purchase Price}} \right) \times 100\%$$The monthly PMI payment is determined using the formula:
$$\text{Monthly PMI} = \frac{\text{Loan Amount} \times \text{Annual PMI Rate}}{12}$$When Can PMI Be Removed?
Under the federal Homeowners Protection Act (HPA), home buyers have the right to request PMI cancellation once their principal balance reaches 80 percent of the original home value. Furthermore, mortgage lenders are required to automatically cancel PMI once the loan balance drops to 78 percent of the original home purchase price.
You can also explore related mortgage metrics using our Loan to Value Ratio Calculator and Mortgage Calculator with Taxes and Insurance.
Frequently Asked Questions
What is Private Mortgage Insurance (PMI)?
PMI is an insurance policy that protects the mortgage lender if you default on conventional mortgage loan payments. It is required when your down payment is less than 20 percent.
How much does PMI usually cost?
PMI typically costs between 0.3% and 1.5% of your total loan amount annually. For a $300,000 loan, an annual PMI rate of 0.5% equals $1,500 per year or $125 per month.
Can I remove PMI early?
Yes, you can request PMI cancellation when your loan balance reaches 80% of the original home purchase price, or if significant property appreciation increases your home equity above 20%.
Is PMI tax deductible?
PMI tax deductibility depends on current IRS guidelines and individual income limits. Consult a licensed tax professional to check eligibility for your specific tax year.
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