How to Calculate Your Mortgage Payment When PMI Is Included

What PMI Is and Why It Affects Your Payment

PMI (private mortgage insurance) is an extra monthly charge added to your mortgage payment when you put down less than 20 percent on a home purchase. The lender requires it to protect themselves if you stop paying. PMI is not the same as homeowners insurance — it protects the bank, not your house.

Your total monthly payment includes four parts: principal (the amount borrowed), interest, property taxes, and homeowners insurance. PMI is a fifth line item that sits on top of these. Once you own 20 percent of the home's value through a combination of your down payment and paid-down principal, you can request to have PMI removed.

The cost of PMI varies based on your down payment size, credit score, loan amount, and the type of loan. A smaller down payment means higher PMI. A lower credit score also means higher PMI. Understanding how much PMI will add to your payment helps you decide whether to save for a larger down payment or move forward with a smaller one.

Key Takeaways

• PMI is a monthly insurance charge lenders require when your down payment is less than 20 percent, and it sits as a separate line on your mortgage bill.
• PMI cost depends on your down payment percentage, credit score, loan amount, and loan type — the same loan can have different PMI costs for different borrowers.
• You can estimate PMI by multiplying your loan amount by the annual PMI rate (usually 0.3 to 1.5 percent) and dividing by 12 months.
• PMI can be removed once you reach 20 percent equity in your home, either by paying down the loan or by the home value increasing.
• Your lender must tell you the exact PMI amount before you close, so any estimate you make now will change when you lock in your actual loan terms.

The Basic Formula for Estimating PMI

The simplest way to estimate PMI is to use this formula: Loan Amount × Annual PMI Rate ÷ 12 = Monthly PMI Payment.

Here is how it works in practice. Say you are buying a $300,000 home with a $60,000 down payment (20 percent). Your loan amount is $240,000. If your annual PMI rate is 0.6 percent, the math is: $240,000 × 0.006 ÷ 12 = $120 per month in PMI.

The challenge is knowing what annual PMI rate to use, because it is not the same for everyone. Your rate depends on your credit score, down payment percentage, and loan type. Lenders publish PMI rate tables, but you will not know your exact rate until you get a loan estimate from an actual lender. For now, using 0.5 to 1.0 percent as a rough range gives you a ballpark figure.

How Down Payment Size Changes Your PMI Cost

The smaller your down payment, the higher your PMI rate — and the higher your monthly PMI charge. This is because the lender's risk increases when you have less money invested in the home.

A 5 percent down payment typically carries a higher PMI rate than a 15 percent down payment on the same loan. The difference can be 0.3 to 0.5 percentage points or more, which adds up quickly on a large loan. On a $240,000 loan, moving from a 1.0 percent annual rate to a 0.6 percent annual rate saves you $96 per year — or $8 per month.

This is why some buyers choose to wait and save for a larger down payment rather than buy now with PMI. The trade-off is time: you delay buying, but you lower your monthly payment and total interest paid over the life of the loan. Only you can decide whether waiting makes sense for your situation.

Credit Score Impact on PMI Rates

Your credit score affects not just your mortgage interest rate, but also your PMI rate. A score of 740 or higher typically qualifies for the lowest PMI rates. A score below 620 may result in PMI rates that are 0.5 to 1.0 percentage points higher.

This means two buyers with identical down payments and loan amounts can have very different PMI costs based on their credit scores. If you are close to a credit score milestone — say, 20 points away from 740 — it may be worth waiting a few months to improve your score before applying for a mortgage. The monthly savings can be substantial.

You can check your credit score for free through AnnualCreditReport.com or through your bank or credit card company. If your score is lower than you expected, review your credit report for errors and work on paying down existing debt before you apply for a mortgage.

Loan Type and PMI: Conventional vs. FHA vs. VA

Conventional loans use PMI when your down payment is less than 20 percent. PMI can be removed once you reach 20 percent equity.

FHA loans require mortgage insurance regardless of down payment size. FHA mortgage insurance has two parts: an upfront premium (usually 1.75 percent of the loan amount, paid at closing) and an annual premium (0.4 to 0.9 percent depending on loan amount and down payment). FHA mortgage insurance cannot be removed, even after you reach 20 percent equity — it stays for the life of the loan unless you refinance into a conventional loan later.

VA loans (for military members and veterans) do not require PMI at all, even with zero down payment. Instead, they charge a one-time funding fee at closing, which can be rolled into the loan amount.

If you are comparing loan types, factor in the full cost of insurance over time, not just the monthly payment. An FHA loan with a lower interest rate may cost more overall because the mortgage insurance never goes away.

Using an Online Mortgage Calculator to Estimate Total Payment

Most mortgage calculators let you enter your down payment percentage, and they automatically estimate PMI based on typical rates for your credit score range. These calculators are useful for getting a rough idea, but they use averages — your actual PMI will depend on your specific credit score and the lender you choose.

To use a calculator effectively, enter the home price, down payment amount, interest rate (you can use current average rates as a placeholder), loan term (usually 30 years), and your estimated credit score range. The calculator will show you a total monthly payment that includes an estimated PMI.

Write down the PMI amount the calculator shows you separately from your principal and interest payment. This helps you see how much PMI is costing you each month and understand what you will save once it is removed.

When PMI Gets Removed and How to Request It

PMI is automatically removed when your loan balance drops to 80 percent of the original home purchase price — the point at which you have 20 percent equity. This happens through a combination of your monthly payments and any home value increase.

You can also request PMI removal earlier if your home has increased in value. If you bought for $300,000 and it is now worth $375,000, you may have 20 percent equity even if you have not paid down the loan that far. You will need a new appraisal (which costs $300 to $500) to prove the higher value, and your lender must approve the removal.

Some lenders automatically remove PMI when you reach the 20 percent equity mark. Others require you to request it in writing. Check your loan documents or call your lender to find out their policy. Do not assume PMI will fall off on its own — staying on top of this can save you hundreds of dollars per year.

Frequently Asked Questions

Can I pay extra toward principal to get rid of PMI faster?

Yes. Any extra payment you make toward principal reduces your loan balance and moves you closer to 20 percent equity. If you can afford to pay extra, it speeds up PMI removal. However, check your loan documents first — some loans have prepayment penalties, though these are rare on conventional mortgages.

What if I refinance — does PMI go away?

Refinancing into a new loan can remove PMI if you refinance into a conventional loan with 20 percent equity at that time. However, refinancing costs money (closing costs typically run 2 to 5 percent of the loan amount), so you need to calculate whether the PMI savings over time will offset those costs. An FHA loan refinanced into a conventional loan is one way to escape FHA mortgage insurance.

Is PMI tax deductible?

PMI was tax deductible under certain income limits in past years, but this deduction expired at the end of 2023. Check with a tax professional about your specific situation, as rules can change and vary by state.

How much does PMI typically cost per month?

PMI typically ranges from $100 to $300 per month on a conventional loan, depending on loan amount, down payment, and credit score. On a $240,000 loan with a 10 percent down payment and a 700 credit score, you might see PMI around $150 to $200 per month. Your lender's loan estimate will show the exact amount for your situation.

Can I avoid PMI by putting down 19 percent instead of 20 percent?

No. PMI is required if your down payment is less than 20 percent. Some buyers use a strategy called "piggyback lending" — taking out a second mortgage for part of the down payment to reach 20 percent on the first loan — but this approach has its own costs and risks. Speak with a mortgage professional about whether it makes sense for you.