How the PMI Calculator works
Private mortgage insurance (PMI) is the extra premium most conventional lenders charge when a home loan's down payment is less than 20% of the purchase price. This calculator applies the standard, lender-used formula to estimate that premium and shows how much principal needs to be paid down before PMI can be removed.
The formula
The loan amount is the home price minus the down payment: Loan amount = Home price − Down payment. The loan-to-value ratio is LTV = Loan amount / Home price. PMI is calculated as:
Monthly PMI = (Loan amount × Annual PMI rate) / 12
This premium generally applies only while the LTV ratio is above 80%. Once the loan balance falls to the cancellation threshold you select — 80% of the original home value (borrower-requested) or 78% (automatic termination) — the calculator reports how much additional principal would need to be paid down to reach that point, assuming the home's value stays flat.
Worked example
Take a $350,000 home purchased with a 10% down payment ($35,000). The loan amount is $315,000, giving an LTV of 90% — above the 80% threshold, so PMI applies. At an annual PMI rate of 0.75%, the monthly premium is ($315,000 × 0.0075) / 12 ≈ $196.88 per month, or about $2,362.50 per year. To reach 80% LTV ($280,000 loan balance), the borrower would need to pay down roughly $35,000 of additional principal — through regular payments, an extra prepayment, or home price appreciation.
When PMI is required, and how it goes away
Conventional lenders generally require PMI whenever the down payment is below 20% of the home's price. Under the U.S. Homeowners Protection Act, on a primary residence with an owner-occupant borrower who is current on payments, the lender must automatically terminate PMI once the loan balance reaches 78% of the home's original value, and must cancel it earlier at the borrower's written request once the balance reaches 80% of that value. Some servicers also allow cancellation sooner if a new appraisal shows enough equity has built up through price appreciation.
What moves the PMI cost most
- Down payment size: a larger down payment lowers the loan amount and LTV directly — crossing the 20% down payment line removes PMI from a conventional loan entirely.
- PMI rate: actual rates are set by mortgage insurers based on credit score, LTV, and loan type, and commonly range from about 0.3% to 1.5% of the loan amount per year — check your Loan Estimate for the exact figure.
- Home price: a higher purchase price increases the loan amount for the same down-payment percentage, which raises the dollar cost of PMI even at the same rate.