PMI Calculator
Calculate your private mortgage insurance costs, when you'll reach 20% equity to cancel PMI, and total PMI payments over the life of your loan. PMI is required for down payments less than 20%.
PMI Costs
Equity Timeline
Savings Analysis
PMI Requirements and Guidelines
When PMI is Required
- Down payment less than 20% (conventional loans)
- LTV ratio above 80%
- Some FHA loans (always required)
- Cash-out refinances that increase LTV
- Investment properties (higher requirements)
PMI Rate Ranges
- 0.3% - 1.5% of loan amount annually
- Higher for riskier loans
- Lower for excellent credit
- Based on loan-to-value ratio
PMI Cancellation
- Automatic cancellation at 78% LTV (Fannie Mae/Freddie Mac)
- Can request cancellation at 80% LTV
- Requires appraisal to confirm value
- Private lenders may have different rules
- FHA MIP cannot be canceled
Avoiding PMI
- Save for 20% down payment
- Use gift funds for down payment
- Choose FHA or VA loans
- Consider 80/10/10 financing
- Wait for home price appreciation
Understanding Private Mortgage Insurance (PMI)
Private Mortgage Insurance (PMI) is insurance that protects lenders in case you default on your loan. It's required when your down payment is less than 20% of the home's purchase price. PMI can be expensive, but there are ways to minimize its impact.
How PMI Works
PMI is calculated as a percentage of your loan amount and added to your monthly mortgage payment. The insurance premium goes to a private insurance company, not the lender. PMI protects the lender, not you, in case of default.
PMI vs. Down Payment Trade-offs
While PMI allows you to buy a home with less money down, it can be expensive over time. Use this calculator to determine if saving for a larger down payment would be more cost-effective than paying PMI.
Types of PMI
- Borrower-Paid PMI: You pay the premium monthly as part of your mortgage payment
- Lender-Paid PMI (LPMI): The lender pays the premium upfront, but it's added to your loan balance
- Single-Premium PMI: One-time payment at closing (less common)
- Split-Premium PMI: Combination of upfront and monthly payments
Equity Building and PMI Cancellation
As you build equity through payments and home appreciation, your loan-to-value ratio decreases. Once you reach 78% LTV (22% equity), PMI is automatically canceled for Fannie Mae and Freddie Mac loans. You can request cancellation earlier with an appraisal.
Tax Treatment
PMI premiums are tax-deductible if you itemize deductions on your tax return. The deduction is available for PMI paid on loans originated after 2006. Keep records of your PMI payments for tax purposes.
Tip: PMI can add hundreds of dollars to your monthly payment. Use this calculator to understand the true cost and plan for PMI cancellation. Consider making extra payments to build equity faster and eliminate PMI sooner.