Transparent method
The formula
Worked example
Example inputs
How to interpret the result
Private mortgage insurance protects the lender, not the borrower, against default risk on a loan with a smaller down payment, and it's priced and eventually removed based on loan-to-value crossing specific thresholds, which is why a bigger down payment doesn't just lower the loan balance: it can eliminate this cost entirely.
Before you rely on it
What to check
Compare the ongoing PMI cost against what a larger down payment would actually save in monthly PMI, since crossing an LTV threshold can eliminate the cost rather than merely reducing it.
The common error
Where people go wrong with PMI calculator
Treating PMI as a fixed cost of any loan with less than 20% down, rather than a cost that scales with and eventually disappears above specific loan-to-value thresholds. A slightly larger down payment can sometimes clear a threshold and remove the cost entirely.
Sensitivity evidence
How home price changes the estimated monthly PMI
| Home price | Estimated monthly PMI | Equity needed for target |
|---|---|---|
| $320,000 | $152 | $30,400 |
| $360,000 | $173 | $39,200 |
| $400,000worked example | $195 | $48,000 |
| $440,000 | $217 | $56,800 |
| $480,000 | $238 | $65,600 |
Every input, tested
Which input moves the estimated monthly PMI most
| Input | Tested from | To | Estimated monthly PMI at each end | Swing |
|---|---|---|---|---|
| Annual PMI rate | 0.400% | 0.900% | $120 to $270 | $150 (77%) |
| Home price | $360,000 | $440,000 | $173 to $217 | $43 (22%) |
| Down payment | $36,000 | $44,000 | $197 to $193 | $4.33 (2.2%) |
| Target cancellation LTV | 76.0% | 80.0% | $195 to $195 | none |
Two variables at once
Estimated monthly PMI by home price and down payment
| Home price \ Down payment | $32,000 | $40,000 | $48,000 |
|---|---|---|---|
| $320,000 | $156 | $152 | $147 |
| $360,000 | $178 | $173 | $169 |
| $400,000 | $199 | $195 | $191 |
| $440,000 | $221 | $217 | $212 |
| $480,000 | $243 | $238 | $234 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Home price | $400,000 |
| Down payment | $40,000 |
| Annual PMI rate | 0.650% |
| Target cancellation LTV | 78.0% |
| Estimated monthly PMI | $195 |
| Equity needed for target | $48,000 |
Where the inputs come from
Home price and down payment determine the loan-to-value ratio, which sets the PMI rate. The annual PMI rate depends on credit score, LTV and loan type, and often falls between about half a percent and one and a half percent of the loan for many borrowers; the lender's quote is the number to use. Target cancellation LTV is 78% or 80%, the levels at which PMI can end.
When the result stops applying
PMI applies to conventional loans with under 20% down. FHA loans use a different mortgage insurance premium that may last the life of the loan, and VA loans have no monthly mortgage insurance. Single-premium or lender-paid PMI changes the structure. If value rises, you can ask for cancellation based on a new appraisal, subject to servicer rules.
What to compare it with
Plan to remove PMI. Use the amortization schedule to find the month the balance reaches 78% of the original value, and the extra payment calculator to see how much sooner extra principal gets there. If home values rise, ask for a new appraisal to remove PMI earlier. Compare PMI with the alternative of a larger down payment or a piggyback second loan, using the loan-to-value calculator to find the amount that reaches 80%.
People also ask
Frequently asked questions
When does PMI end?
You can request cancellation at 80% of the original value and it ends automatically at 78% if you are current on payments.
Is PMI tax deductible?
Deduction rules have changed over the years and depend on income. Check current law for your tax year.
Can I avoid PMI with less than 20% down?
Some lenders offer lender-paid PMI with a higher rate, and VA loans have none. Compare the total cost.