What PMI is and who pays it
Private mortgage insurance protects the lender, not the borrower, against default on a conventional loan when the down payment is less than 20% of the home's value — a loan-to-value ratio above 80%. The borrower pays for it, usually as a monthly premium added to the mortgage payment. The cost is a percentage of the loan amount per year, set by the insurer from the loan-to-value ratio and the borrower's credit score, and it typically runs from about 0.2% to 1.6% a year. On a $360,000 loan at 0.44% that is $1,584 a year, or $132 a month.
The table is a representative rate card for a 30-year fixed loan, as a percentage of the loan per year. Lower credit scores and smaller down payments cost more, and the two compound: a 620 score with 3% down pays roughly eight times the rate of a 760 score with 15% down.
| LTV | 760+ | 720–759 | 680–719 | 620–679 |
|---|---|---|---|---|
| 95–97% | 0.58% | 0.82% | 1.14% | 1.63% |
| 95% | 0.46% | 0.65% | 0.92% | 1.36% |
| 90% | 0.30% | 0.44% | 0.63% | 0.97% |
| 85% | 0.19% | 0.28% | 0.40% | 0.65% |
How the down payment changes PMI
The table follows a $400,000 home with a 720–759 credit score. Each step up in down payment lowers both the loan and the rate; at 20% down PMI disappears. The calculator also reports the extra down payment needed to reach 20% — sometimes a gift or a few months' delay is cheaper than years of premiums.
| Down payment | Amount | LTV | PMI rate | PMI per month |
|---|---|---|---|---|
| 3% | $12,000 | 97% | 0.82% | $265.13 |
| 5% | $20,000 | 95% | 0.65% | $205.83 |
| 10% | $40,000 | 90% | 0.44% | $132.00 |
| 15% | $60,000 | 85% | 0.28% | $79.33 |
| 20% | $80,000 | 80% | none | $0 |
When PMI ends
Under the US Homeowners Protection Act, you can request cancellation once the balance reaches 80% of the home's original value (and you have a good payment history), and the lender must cancel it automatically at 78%, or at the midpoint of the term regardless of balance. On a 30-year loan with 10% down, the amortization schedule alone reaches 80% after about eight years. The calculator gives both months and the total PMI paid to each.
| Trigger | Reached | Time | PMI paid by then |
|---|---|---|---|
| Request at 80% LTV (original value) | Month 95 | 7 yr 11 mo | $12,540 |
| Automatic at 78% LTV | Month 109 | 9 yr 1 mo | $14,388 |
| Midpoint of the term | Month 180 | 15 yr 0 mo | $23,760 |
Getting rid of PMI sooner
Two routes shorten the wait. Extra principal payments bring the balance to 80% earlier; the mortgage payoff calculator shows how much. Alternatively, if the home has appreciated, a new appraisal (which you pay for, typically $400–600) can show the current balance is already 80% or less of the current value; most lenders allow this after two years of ownership, or sooner with substantial improvements. The calculator's appreciation input estimates when that would happen at the rate you enter. Refinancing into a new loan at or below 80% LTV also removes PMI, at the cost of closing costs and whatever the new rate is.
Credit score and the cost of PMI
For the same 10% down payment on the $400,000 home, credit score alone moves the premium by a factor of three. If your score is near a band boundary, the saving from crossing it before applying — paying down card balances, correcting report errors — can be tens of dollars a month for years.
| Score | PMI rate | Per month | Total to 80% LTV (~8 years) |
|---|---|---|---|
| 760+ | 0.30% | $90.00 | $8,550 |
| 720–759 | 0.44% | $132.00 | $12,540 |
| 680–719 | 0.63% | $189.00 | $17,955 |
| 620–679 | 0.97% | $291.00 | $27,645 |
Alternatives to monthly PMI
Lender-paid PMI rolls the cost into a higher interest rate for the life of the loan; it cannot be cancelled and usually costs more over a long hold. Single-premium PMI is paid up front at closing (roughly 1–2% of the loan) and can suit buyers who will keep the loan for years and have cash to spare, though it is not refunded on an early sale. A piggyback loan — an 80% first mortgage plus a 10% second — avoids PMI at the cost of a higher rate on the second loan. FHA loans have their own mortgage insurance premium, paid for the life of the loan when the down payment is under 10%, and VA loans have none. Compare total cost over the years you expect to keep the loan; for most buyers who will reach 20% equity within a few years, monthly PMI with prompt cancellation is the cheapest route.
- PMI per month = loan × annual rate ÷ 12.
- Request cancellation at 80% LTV of original value; automatic at 78% or the term midpoint.
- A new appraisal after appreciation can end it early; so can extra principal.
- Lender-paid PMI cannot be cancelled — it lasts as long as the loan.