How is PMI Calculated?

When you buy a home with less than 20% down, your lender may require you to have private mortgage insurance (PMI). It’s a standard part of many conventional loans, but it can catch buyers off guard, especially first-time buyers. You’ve 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? In this post, we’ll explain how lenders figure PMI, what affects it, and how you can estimate yours using HomeLight’s free PMI calculator. You’ll also see examples that show how changes in your down payment, credit score, or loan type can shift your monthly costs up or down. A Top Agent Can Help You Find A House You Can Afford We analyze millions of home sales to find buyer’s agents who will show you the right home at the right price. Our service is 100% free, with no catch. Agents don’t pay us to be listed, so you get the best match. How is PMI calculated? Private mortgage insurance 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, credit score, loan type, and occupancy (whether you’ll live in the home)...