What Is PMI? Cost, Rates & How PMI Is Calculated
What PMI is, how much it costs, how PMI rates are calculated, when it is required, and how down payment affects your monthly mortgage payment.
Estimate PMI in the Mortgage CalculatorWhat is PMI?
Private Mortgage Insurance (PMI) is insurance that protects the lender — not you — if you stop paying a conventional mortgage. It allows buyers to purchase with less than 20% down while the lender’s risk is covered.
PMI is not homeowners insurance. It does not cover fire, theft, or liability. It is a monthly cost tied to your loan until you have enough equity or meet removal rules. FHA loans use Mortgage Insurance Premium (MIP) with different rules.
When is PMI required?
On most conventional loans, PMI is required when your down payment is below 20% of the purchase price. Some programs allow as little as 3% down, which means PMI for a longer period unless you pay down the balance or gain equity through appreciation.
Putting 20% down on a conventional loan typically avoids PMI entirely. VA loans for eligible veterans often have no monthly PMI, though other fees may apply.
How much is PMI?
PMI cost is usually quoted as an annual rate applied to the original loan amount, then divided into monthly payments. Typical annual PMI rates fall roughly between 0.3% and 1.5% of the loan — not a single fixed number for every borrower.
On a $380,000 loan (5% down on a $400,000 home), that range might mean about $95 to $475 per month before taxes and insurance. Credit score, down payment percentage, loan type, and debt-to-income profile all affect the rate a lender assigns.
How is PMI calculated?
The basic calculation: (loan amount × annual PMI rate) ÷ 12 = monthly PMI. Lenders apply your assigned annual PMI rate to the loan amount, then spread that cost across 12 monthly payments.
Our mortgage calculator applies this method when down payment is under 20%. Enter the PMI rate from your Loan Estimate for a closer match — lender quotes are the source of truth, not a generic estimate.
Worked example: PMI monthly cost
Illustrative only — actual PMI pricing depends on your credit profile, down payment, loan type, and lender. Use your Loan Estimate for the rate that applies to you.
| Input | Value |
|---|---|
| Home price | $400,000 |
| Down payment (5%) | $20,000 |
| Loan amount | $380,000 |
| Example annual PMI rate | 0.5% |
| Annual PMI ($380,000 × 0.005) | $1,900 |
| Monthly PMI ($1,900 ÷ 12) | ≈ $158 |
What determines a PMI rate?
Lenders and PMI providers price risk. Lower credit scores, smaller down payments, and higher loan-to-value ratios generally mean higher PMI rates. Stronger profiles may land near the low end of the typical range.
PMI rates are not published like benchmark mortgage rates. Your loan officer provides the rate that applies to your file. Treat online ranges as planning guides, not guaranteed pricing.
How down payment affects PMI and your payment
A smaller down payment increases loan amount and usually triggers PMI. Both raise your total monthly housing cost beyond principal and interest alone.
Example: $400,000 home with 5% down ($20,000) leaves a $380,000 loan. At 6.5% over 30 years, principal and interest is about $2,402 per month. Add an illustrative 0.5% annual PMI rate and monthly PMI is about $158 — roughly $2,560 before taxes, insurance, and HOA. Same home with 20% down eliminates PMI and reduces the loan to $320,000, lowering P&I to about $2,022 at the same rate.
Use the mortgage calculator to see PMI line-item in your full payment. Use the affordability calculator to test how a larger down payment changes your range.
How to remove PMI
On conventional loans, you can request PMI cancellation when your balance reaches 80% of the original home value. PMI must automatically terminate at 78% if you are current on payments. If your home appreciated quickly, a new appraisal may support earlier removal — confirm requirements with your servicer.
Extra principal payments through our mortgage payoff calculator can help you reach 20% equity sooner, reducing total PMI paid over time.
Ready to run the numbers for your situation?
Estimate PMI in the Mortgage CalculatorCommon questions
- How much is PMI per month?
- Monthly PMI depends on loan amount and your PMI rate. On a $380,000 loan, annual rates from about 0.3% to 1.5% translate to roughly $95 to $475 per month. Your lender quote is the accurate figure for your loan.
- What is a typical PMI rate?
- Many conventional borrowers see annual PMI rates in the 0.3% to 1.5% range, but your rate depends on credit, down payment, and loan structure. It is not a universal published rate like benchmark mortgage averages.
- How is PMI calculated on a mortgage?
- Multiply the loan amount by the annual PMI rate, then divide by 12 for the monthly charge. Our mortgage calculator does this automatically when down payment is below 20%.
- What is the cost of private mortgage insurance?
- PMI cost is the monthly (or annual) premium you pay until you reach sufficient equity or meet removal rules. It is separate from homeowners insurance and does not protect you as the homeowner.