Estimate how much private mortgage insurance (PMI) will add to your monthly payment and how long it will take to reach the 20% and 22% equity points where PMI can be removed.
What is PMI?
Private mortgage insurance (PMI) protects the lender, not you, if you stop paying a conventional mortgage. Lenders usually require it when your down payment is less than 20% of the home's price. You pay for it, typically as a monthly charge added to your mortgage payment.
How PMI is calculated
Monthly PMI = Loan amount × annual PMI rate ÷ 12
The PMI rate depends mostly on your credit score and how much you put down. Rates often fall between about 0.3% and 1.5% of the loan per year. Your lender's Loan Estimate shows your exact figure.
When does PMI go away?
For most conventional loans:
- At 80% loan-to-value, based on the original value, you can ask your lender to cancel PMI if you have a good payment history.
- At 78% loan-to-value on the original payment schedule, PMI is generally removed automatically.
FHA loans work differently: they use a mortgage insurance premium (MIP) that, for many borrowers, lasts for the life of the loan unless they refinance.
Worked example
You buy a $350,000 home with 10% down, so you borrow $315,000 at 6.5% for 30 years. With a PMI rate of 0.5%:
- PMI costs $131.25 a month on top of $1,991.01 in principal and interest.
- Following the normal schedule, you reach 80% loan-to-value after about 95 months (7 years 11 months) and can request removal.
- By then you will have paid about $12,469 in PMI. Automatic removal at 78% would come at 109 months.
How to get rid of PMI faster
- Make extra principal payments. Every extra dollar brings the 80% point closer. Try the loan payoff calculator.
- Get a new appraisal. If your home has risen in value, some lenders will cancel PMI based on the new value.
- Refinance once you have 20% equity, if rates make sense.
Frequently asked questions
Is PMI always a bad deal?
Not necessarily. PMI lets you buy years earlier than saving a full 20% would. If prices are rising, buying sooner with PMI can cost less overall.
Is PMI tax-deductible?
Tax rules for mortgage insurance have changed over the years. Check current IRS rules or ask a tax professional.
Does PMI cover me if I lose my job?
No. PMI only protects the lender. Mortgage protection insurance and disability insurance are separate products.
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Results are estimates for planning and education only. They are not financial, tax, legal or medical advice. Check important numbers with a qualified professional.