What is PMI?
Private mortgage insurance protects the lender, not you. It's usually required on a conventional loan when you put less than 20% down. The cost depends on your credit, down payment and the insurer. Freddie Mac puts it at roughly $30 to $70 a month per $100,000 borrowed, about 0.36% to 0.84% of the loan a year, and uses 0.51% as an example rate. This calculator starts at 0.5%. Enter the rate from your Loan Estimate.
When PMI ends
Under the Homeowners Protection Act, for loans on a main home closed since July 29, 1999:
- 80%: you can ask in writing to cancel PMI when the balance is scheduled to reach 80% of the original value, or sooner if extra payments get you there. You need a good payment record, no second mortgage, and proof the value hasn't dropped.
- 78%: the servicer must end PMI automatically when the balance is scheduled to reach 78% of the original value, if you're current. Extra payments don't move this date.
- Midpoint: PMI must end the month after the loan's midpoint, 15 years into a 30-year loan, even if 78% hasn't been reached.
Original value means the lower of the price and the appraised value when you bought.
How it's calculated
Removal: the first payment after which the scheduled balance ≤ 80% (or 78%) of the price
Total PMI = monthly PMI × number of payments with PMI
Worked example
A $400,000 home with $40,000 down (90% LTV) at 6.5% for 30 years. Principal and interest is $2,275.44. PMI at 0.5% is 360,000 × 0.005 ÷ 12 = $150 a month. The scheduled balance reaches 80% ($320,000) after payment 95, and 78% ($312,000) after payment 109. PMI paid until automatic removal: 109 × $150 = $16,350. Cancelling at 80% saves $2,100.
Limitations
- FHA, VA and lender-paid mortgage insurance follow different rules. See the FHA calculator for MIP.
- Some PMI is paid upfront or split. This page covers the common monthly kind.
- Investor rules (Fannie Mae, Freddie Mac) can be more generous than the law, never less.