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 an illustrative rate card for a 30-year fixed loan, as a percentage of the loan per year. It is not an insurer's published rate sheet; use it only for rough planning and replace it with your lender's quote. 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 servicer must end it automatically on the date the original amortization schedule reaches 78% (12 U.S.C. 4902(b)), or at the midpoint of the term regardless of balance (12 U.S.C. 4902(c)), provided you are current on payments. Automatic termination follows the initial schedule, so extra payments bring forward only the 80% request date. 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.