{"id":63662,"date":"2025-10-17T11:11:49","date_gmt":"2025-10-17T18:11:49","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=63662"},"modified":"2025-10-17T11:11:49","modified_gmt":"2025-10-17T18:11:49","slug":"buyer-how-is-pmi-calculated","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/buyer-how-is-pmi-calculated\/","title":{"rendered":"How is PMI Calculated?"},"content":{"rendered":"

When you buy a home with less than 20% down, your lender may require you to have private mortgage insurance (PMI). It\u2019s a standard part of many conventional loans, but it can catch buyers off guard, especially first-time buyers.<\/p>\n

You\u2019ve likely heard of PMI, and you know it raises your monthly payments, but how is PMI calculated? And how long do you need to pay for it?<\/p>\n

In this post, we\u2019ll explain how lenders figure PMI, what affects it, and how you can estimate yours using HomeLight\u2019s free PMI calculator. You\u2019ll also see examples that show how changes in your down payment, credit score, or loan type can shift your monthly costs up or down.<\/p>\n

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How is PMI calculated?<\/h2>\n

Private mortgage insurance<\/a> is typically calculated as a percentage of your original loan amount, multiplied by your lender-assigned PMI rate. The rate depends on your loan-to-value (LTV) ratio<\/a>, credit score<\/a>, loan type<\/a>, and occupancy (whether you\u2019ll live in the home).<\/p>\n

According to Fannie Mae, most PMI rates fall between 0.58% and 1.86%<\/a> annually. Lenders divide that annual cost into monthly installments, which are added to your mortgage payment.<\/p>\n

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Here\u2019s the basic formula:
\nPMI = (Loan amount \u00d7 PMI rate) \u00f7 12<\/strong><\/em><\/p>\n

Example: If you buy a $400,000 home, put 10% down, and have a 0.75% PMI rate,
\nyour initial calculation would look something like this:
\n($360,000 \u00d7 0.0075) \u00f7 12 = $225\/month<\/strong><\/em><\/p>\n<\/div>\n

Here\u2019s how your PMI payment might look at different down payment levels:<\/p>\n\n\n\n\n\n\n
Home price<\/strong><\/td>\nDown payment<\/strong><\/td>\nLoan amount<\/strong><\/td>\nPMI rate<\/strong><\/td>\nEst. monthly PMI<\/strong><\/td>\n<\/tr>\n
$400,000<\/td>\n5%<\/td>\n$380,000<\/td>\n1.0%<\/td>\n$317<\/td>\n<\/tr>\n
$400,000<\/td>\n10%<\/td>\n$360,000<\/td>\n0.75%<\/td>\n$225<\/td>\n<\/tr>\n
$400,000<\/td>\n15%<\/td>\n$340,000<\/td>\n0.5%<\/td>\n$142<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

These are rough estimates using round numbers for illustrative purposes. Lenders make adjustments to the equation based on the combination of your credit score, down payment amount, and loan type.<\/p>\n

If you have a higher credit score, you can qualify for lower PMI payments. A lower credit score will typically increase your payment, but can be offset slightly with a higher down payment.<\/p>\n

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Try HomeLight\u2019s PMI calculator<\/h2>\n

Use the calculator below to estimate your PMI based on your own numbers. You\u2019ll see how much PMI might add to your monthly payment, and when it could drop off once you\u2019ve built enough equity. (We\u2019ll share more on removing PMI in a minute.)<\/p>\n