Free PMI Calculator

What Is Private Mortgage Insurance (PMI)?

Private mortgage insurance (PMI) is a policy that protects the lender if you default on a conventional home loan. Lenders typically require this insurance when your down payment is less than 20% of the purchase price. A private mortgage insurance calculator — like the free online tool described here — helps you estimate the monthly premium based on your loan amount, credit profile, and the applicable PMI rate.

While PMI enables you to buy a home with a smaller upfront payment, it adds a recurring cost to your monthly housing expenses. The premium varies with your loan‑to‑value (LTV) ratio, credit score, and the lender’s pricing structure. Once you build enough equity, the policy can be removed, potentially saving you hundreds of dollars each month.

How PMI Rates Are Determined

PMI rates generally fall between 0.5% and 3% of the original loan amount per year. The exact percentage you pay is influenced by three core elements:

• Credit score – Borrowers with higher FICO scores are seen as lower risk and typically qualify for lower rates. Most private insurers will not cover a score below 620.
• Down payment (LTV ratio) – A larger down payment means a lower LTV, which reduces the insurer’s risk and results in a smaller premium.
• Lender and insurer policies – Different companies use proprietary rate charts and may apply adjustments for loan size, occupancy type (primary home, second home, investment property), and loan purpose (purchase vs. refinance).

Typical PMI Rate Grid

The following illustrative table shows how LTV and credit score interact to produce a base PMI rate:

FICO Score Range	LTV 90.01%–95%	LTV 85.01%–90%	LTV ≤85%
620–659	1.50%	1.40%	1.30%
660–699	1.20%	1.18%	1.17%
700–759	0.75%	0.73%	0.71%
≥760	0.50%	0.48%	0.46%

Rates are for illustrative purposes; actual premiums depend on the lender’s underwriting criteria.

How to Calculate PMI

The basic formula for annual PMI is:

$$\text{Annual PMI} = \text{Loan Amount} \times \left( \frac{\text{PMI Rate}}{100} \right)$$

The monthly PMI component is simply the annual amount divided by 12:

$$\text{Monthly PMI} = \frac{\text{Annual PMI}}{12}$$

Worked Example 1: Fixed Rate

Imagine you want to purchase a home priced at $100,000 with a$12,000 down payment.

Step 1 – Determine the mortgage amount and LTV

\text{Loan} = $100{,}000 - $12{,}000 = $88{,}000 $$\text{LTV} = \frac{88{,}000}{100{,}000} = 0.88 \; (88\%)$$

Step 2 – Apply the PMI rate

Assuming an LTV of 88% corresponds to a PMI rate of 1.2% per the lender’s table:

\text{Annual PMI} = 88{,}000 \times 0.012 = $1{,}056

Step 3 – Convert to a monthly figure

\text{Monthly PMI} = \frac{1{,}056}{12} = $88

Thus, you would pay an additional $88 per month for PMI.

Worked Example 2: Impact of Credit Score and Adjustments

Consider two borrowers:

• Clyde buys a $500,000 home (second home) with 5$475,000, LTV = 95%. FICO score = 720.
• Trent buys a $200,000 home (investment) with 10$180,000, LTV = 90%. FICO score = 630.

Clyde’s scenario
His score falls in the 700–759 bracket. Base rate for LTV 95% (approximated from the 90.01%–95% column) is 0.75%. Because the loan amount exceeds $400,000 and the property is a second home, the insurer applies a –0.10% adjustment, yielding an effective rate of 0.65%.

\text{Annual PMI} = 475{,}000 \times 0.0065 = $3{,}087.50 \text{Monthly} \approx $257

Trent’s scenario
His 630 score places him in the 620–659 band. Base rate for 90% LTV is 1.5%. No adjustments apply (loan under $400,000). His annual premium:

\text{Annual PMI} = 180{,}000 \times 0.015 = $2{,}700 \text{Monthly} = $225

Despite making a larger percentage down payment, Trent’s lower credit score results in a higher PMI rate — almost 2.3 times Clyde’s rate.

How to Remove or Avoid PMI

Borrowers have several strategies to eliminate PMI:

1. Request cancellation at 20% equity – Once your loan balance falls to 80% of the home’s original purchase price (or current appraised value), you can ask the lender to drop PMI. A good payment history is usually required.
2. Automatic termination at 22% equity – Federal law mandates automatic PMI cancellation when the LTV reaches 78% (i.e., 22% home equity), provided your payments are current.
3. Refinance – Replace your existing mortgage with a new loan that does not require PMI. This works if the new LTV based on the current home value is 80% or less.
4. Piggyback mortgage – Take out a second loan (e.g., a home equity loan) to bring your combined down payment to 20%. The first mortgage covers 80%, your down payment covers a portion, and the second mortgage covers the rest. Although the second loan may carry a higher interest rate, the total cost is often lower than paying PMI.
5. Lender‑paid mortgage insurance (LMPI) – Some lenders offer to pay the PMI in exchange for a slightly higher interest rate. Evaluate the long‑term cost before choosing this option.
6. Home value appreciation – If your home’s value increases, you may reach 20% equity sooner. Pay for an appraisal to verify the new LTV and request PMI cancellation.
7. Consider other loan types – Government‑backed loans (FHA, USDA, VA) sometimes have different insurance requirements. For example, FHA loans require mortgage insurance premiums (MIP) for the life of the loan if the down payment is below 10%, while VA loans generally do not need insurance.
8. Increase your down payment – The most straightforward method: saving enough to put 20% down eliminates the need for PMI from the start.

Advantages of PMI

Despite being an added expense, PMI helps many buyers become homeowners years earlier than if they had saved a 20% down payment. For borrowers with strong credit, the premium can be relatively modest, making the monthly payment affordable. Additionally, while you pay PMI, you are building equity, and if the property appreciates, you may reach the 20% threshold faster and cancel the insurance.

Important Distinctions

• PMI vs. MIP – PMI is provided by private insurers and covers roughly 30% of the loan amount. FHA loans carry mortgage insurance premiums (MIP) that cover the entire loan and may have different cancellation rules.
• PMI vs. Mortgage Protection Insurance – PMI protects the lender, not you. If you are concerned about losing your income due to disability, job loss, or death, you would need separate mortgage protection insurance (an optional, additional cost).
• Tax deductibility – In most cases, PMI premiums are not tax‑deductible under current tax law. Confirm your situation with a tax professional.

Using a monthly PMI calculator or mortgage insurance calculator lets you compare different down payment, loan amount, and credit score scenarios before making a commitment. It is a practical way to understand exactly how much private mortgage insurance will cost you each month and how that cost changes as your equity grows.