Quick Answer: The PMI Formula in 30 Seconds
How is PMI calculated? The standard formula is:
Monthly PMI = (Loan Balance × Annual PMI Rate) ÷ 12
The annual PMI rate is set by the mortgage insurer based primarily on your loan-to-value (LTV) ratio and credit score, and it typically ranges from 0.19% to 2.25% in 2026. A typical example: a $300,000 loan at a 0.62% PMI rate produces a monthly PMI premium of ($300,000 × 0.0062) ÷ 12 = $155 per month, or $1,860 per year.
Key Takeaways
- The PMI formula is loan-balance times annual-rate, divided by 12 -- the same math used by every U.S. mortgage insurer (MGIC, Radian, Essent, Arch, Enact, National MI)
- Your PMI rate is set by a published rate matrix using four factors: LTV, FICO score, loan type, and DTI -- not a single number
- A 60-point credit-score difference can change your PMI by 2x or more; the rate jump at 660 and 740 FICO thresholds is the largest pricing cliff in conventional lending
- Most lenders recalculate PMI annually on the declining loan balance, so the dollar premium drops over time even if the rate stays constant
- The Homeowners Protection Act of 1998 requires automatic PMI termination at 78% LTV on the original amortization schedule -- a legal right, not a courtesy
- Single-premium PMI (SPMI) and split-premium PMI use modified formulas based on a one-time upfront calculation, not monthly recalculation
The PMI Formula, Variable by Variable
The PMI calculation looks simple on the surface, but each variable is determined by a separate underwriting decision. Understanding what feeds into each input is how you spot lender errors and overcharges.
Variable 1: The Loan Balance
The "loan balance" in the PMI formula is almost always your current outstanding principal balance, not the original loan amount. Each year, your lender recalculates PMI on the lower balance, which is why your dollar premium decreases over time. Per the Consumer Financial Protection Bureau (opens in new tab), this is the standard practice for borrower-paid monthly PMI (BPMI), which represents over 90% of PMI policies originated in 2026.
A small number of lenders use a constant-premium approach where the PMI dollar amount is fixed at the original loan balance and does not decline. This is less consumer-friendly and is more common with single-premium PMI structures. Your Closing Disclosure (TRID Form H-25) discloses which method your lender uses.
Variable 2: The Annual PMI Rate
The annual PMI rate is expressed as a percentage of the loan balance and is sourced from the mortgage insurer's published rate card. Each of the six U.S. mortgage insurers publishes a public rate matrix indexed by LTV band and credit-score tier. For example, MGIC publishes its national rate card (opens in new tab) on its public website and updates it semi-annually.
The rate is fixed when the loan is originated and does not change over the life of the loan unless you refinance into a new mortgage. This is critical: your PMI rate is locked the day you close, regardless of later changes to your credit score or home value. To get a lower rate, you must refinance the underlying mortgage.
Variable 3: The Monthly Divisor (12)
Because the PMI rate is annual and the premium is paid monthly, the formula divides by 12. This is the simplest variable but worth verifying on your monthly statement -- some borrowers mistakenly compare an annual quote to a monthly figure on the closing disclosure, leading to a 12x misreading of the cost.
Worked Sanity Check
If you are quoted "0.75% PMI" on a $250,000 loan, the math should be: $250,000 × 0.0075 = $1,875 per year ÷ 12 = $156.25 per month. If your lender's quote shows anything materially different (more than $5-10 off due to rounding), ask them to explain the calculation. The most common discrepancies are using the wrong LTV band or wrong credit-score tier on the rate matrix.
PMI Rate Matrix: How Insurers Set Your Rate
Mortgage insurers do not invent rates per borrower. They publish rate matrices indexed by loan-to-value (LTV) band and credit score tier, and apply adjustments for loan features (term, ARM, cash-out, second home, etc.). Below is a representative national rate matrix for 30-year fixed conventional purchase loans in 2026, compiled from public rate cards of MGIC, Radian, Essent, Arch, and Enact (formerly Genworth).
| LTV Band | 760+ FICO | 740-759 | 720-739 | 700-719 | 680-699 | 660-679 | 620-659 |
|---|---|---|---|---|---|---|---|
| 95.01% - 97% | 0.65% | 0.83% | 1.00% | 1.13% | 1.34% | 1.55% | 1.85% |
| 90.01% - 95% | 0.55% | 0.68% | 0.83% | 0.96% | 1.10% | 1.28% | 1.55% |
| 85.01% - 90% | 0.31% | 0.42% | 0.55% | 0.66% | 0.78% | 0.96% | 1.21% |
| 80.01% - 85% | 0.19% | 0.25% | 0.33% | 0.42% | 0.55% | 0.71% | 0.95% |
Source: Representative national rate card composited from MGIC, Radian, Essent, Arch, and Enact public rate matrices, 30-year fixed conventional purchase loan, primary residence, DTI ≤ 45%, no loan-level adjustments. Actual rates vary by insurer, region, and loan-level price adjustments (LLPAs).
How to Read the Matrix
Find your LTV band on the left, then move right to your credit-score column. The intersection is your base annual PMI rate. For example, an LTV of 92% (between 90.01% and 95%) and a credit score of 720 (in the 720-739 band) gives a base rate of 0.83%. Multiply by your loan balance and divide by 12 to get the monthly premium.
LTV Bands: Why 95.01-97% Is the Most Expensive
The 95.01-97% LTV band is the riskiest for the mortgage insurer because the borrower has the least equity cushion -- a 5% home price decline puts the loan underwater. Insurers price this band 2-3x higher than the 80.01-85% band. According to the Federal Housing Finance Agency's (FHFA) PMI coverage requirements (opens in new tab), loans above 95% LTV require deeper PMI coverage (30%-35% of the loan amount), which directly drives the insurer's premium higher.
Credit Score Tiers: The 660 and 740 Cliffs
Two credit-score cliffs are visible in the matrix: dropping below 740 typically raises your PMI rate by 25%-35%, and dropping below 660 can raise it 50% or more. These thresholds align with how Fannie Mae's and Freddie Mac's loan-level price adjustments (LLPAs) escalate, because the GSEs and PMI insurers price off the same underlying risk model. Per the Federal Reserve's working paper on mortgage insurance pricing (opens in new tab), the default-rate differential between a 740+ borrower and a 660 borrower is approximately 3x in standard conventional lending, which explains the pricing gap.
Rate Adjustments You Might Not See
The base matrix above assumes a 30-year fixed conventional purchase loan on a primary residence with DTI under 45%. The actual quote from your lender may include adjustments (in basis points, where 100 bps = 1.00%):
- +10 to +30 bps for DTI over 45%
- +10 to +25 bps for a 5/1 or 7/1 ARM versus fixed
- +15 to +50 bps for cash-out refinance versus purchase
- +20 to +60 bps for second home or investment property
- +10 to +30 bps for non-owner-occupied condominium
Ask your lender to break out each adjustment line by line. The CFPB's Loan Estimate (TRID Form H-24) discloses PMI as a single dollar figure, but the underwriter's worksheet shows the build-up. You have the right to request it.
Step-by-Step Example: $400,000 Mortgage with 10% Down
Let's walk through the exact PMI calculation for a real-world scenario. Suppose you are buying a $400,000 home with a 10% down payment and a 740 FICO score on a 30-year fixed conventional loan.
Step 1: Calculate the Loan Amount and LTV
- Home purchase price: $400,000
- Down payment: $40,000 (10%)
- Loan amount: $360,000
- Loan-to-value (LTV): $360,000 / $400,000 = 90.0%
An LTV of 90.0% falls into the 85.01-90% band (the boundary is inclusive at 90.00% per most insurer rate cards, but conservatively treated as 90.01-95% by some lenders -- ask which band applies).
Step 2: Find Your Annual PMI Rate
Using the matrix in Section 3, a 740 FICO score in the 85.01-90% LTV band gives an annual PMI rate of 0.42%.
Step 3: Apply the Formula
Monthly PMI = ($360,000 × 0.0042) ÷ 12
Monthly PMI = $1,512 ÷ 12
Monthly PMI = $126.00 per month
Annual PMI = $1,512 per year
Step 4: Calculate the Total PMI Paid Until Cancellation
PMI is automatically terminated when the loan reaches 78% of the original home value on its scheduled amortization. Starting at 90% LTV, you need to pay down the balance from $360,000 to $312,000 -- a $48,000 reduction. On a 30-year fixed loan at a 6.75% interest rate (Freddie Mac PMMS national average for May 2026), this takes approximately 76 months based on the amortization schedule.
If we assume PMI is recalculated annually on the declining balance (the standard for borrower-paid monthly PMI), the average loan balance over the 76-month PMI period is approximately $336,000, producing an average monthly PMI of about $117.60. Total PMI paid: 76 months × $117.60 = approximately $8,938.
| Credit Score | PMI Rate | Year-1 Monthly PMI | Year-1 Annual PMI | Estimated Total Until 78% LTV |
|---|---|---|---|---|
| 760+ | 0.31% | $93 | $1,116 | $6,597 |
| 740-759 | 0.42% | $126 | $1,512 | $8,938 |
| 720-739 | 0.55% | $165 | $1,980 | $11,705 |
| 700-719 | 0.66% | $198 | $2,376 | $14,047 |
| 680-699 | 0.78% | $234 | $2,808 | $16,602 |
| 660-679 | 0.96% | $288 | $3,456 | $20,431 |
| 620-659 | 1.21% | $363 | $4,356 | $25,752 |
Assumptions: $400,000 home, 10% down ($40,000), $360,000 loan amount, 90% LTV at origination, 30-year fixed at 6.75% interest, PMI recalculated annually on declining balance, automatic termination at 78% LTV (approximately month 76).
The takeaway: at the same 10% down payment, a 620-659 FICO borrower pays roughly $19,155 more in lifetime PMI than a 760+ borrower on the same $400,000 home. That single financial decision -- improving your credit score 100 points before buying -- is one of the highest-return moves in home purchasing.
How Down Payment Size Changes Your PMI
Down payment size has a much larger impact on PMI than most borrowers realize. Moving from 5% down to 10% down on the same home does two things: it drops your LTV into a lower (cheaper) band on the rate matrix, AND it reduces the loan balance the rate is applied to. Both effects compound.
Example: $350,000 Home, 720 FICO, 30-Year Fixed
| Down Payment | Loan Amount | LTV | PMI Rate | Monthly PMI | Annual PMI |
|---|---|---|---|---|---|
| 3% ($10,500) | $339,500 | 97% | 1.00% | $283 | $3,395 |
| 5% ($17,500) | $332,500 | 95% | 0.83% | $230 | $2,760 |
| 10% ($35,000) | $315,000 | 90% | 0.55% | $144 | $1,733 |
| 15% ($52,500) | $297,500 | 85% | 0.33% | $82 | $982 |
| 20% ($70,000) | $280,000 | 80% | No PMI | $0 | $0 |
The dollar savings from moving from 3% to 10% down are significant: $139 per month, or $1,662 per year, just on the PMI portion. Over the typical 8-9 year period before automatic cancellation, that's roughly $13,000-$15,000 saved. That's before factoring in the lower principal balance, which reduces interest charges over the life of the loan as well.
Why 3% Down Loans Get the Worst PMI Rates
The 95.01-97% LTV band is the riskiest for insurers because home prices need to fall only 3% to put the loan underwater. Per the Urban Institute's analysis of conventional 97 loans (opens in new tab), default rates on these loans are 2-3x higher than 90% LTV loans during housing-price downturns, which justifies the elevated insurer pricing. Conventional 97 loans (Fannie Mae HomeReady, Freddie Mac Home Possible) are valuable products for first-time buyers, but the PMI cost is a meaningful drag that disappears as soon as you cross the 90% LTV threshold via principal paydown or appreciation.
When to Wait, When to Buy with Low Down Payment
The "save more, pay less PMI" math only works if (a) home prices in your area aren't rising faster than your savings rate and (b) you would actually save the difference rather than spend it. Per the National Association of Realtors' existing-home-sales data (opens in new tab), U.S. median home prices grew approximately 4.5% annualized over the past 24 months -- if your savings rate produces less than 4.5% annual progress toward 20% down, buying now with PMI is often the better financial move. Run both scenarios in our mortgage calculator to see the full picture.
How PMI Changes Over the Life of Your Loan
Borrower-paid monthly PMI (BPMI) is not a flat fee. The monthly premium changes based on two factors: (1) your declining loan balance, and (2) the eventual termination of PMI once you reach the 78% or 80% LTV threshold. Understanding the timeline helps you plan when to refinance, accelerate principal payments, or request cancellation.
The Three Cancellation Milestones
Per the Homeowners Protection Act of 1998 (opens in new tab), your PMI must be cancelled or terminated at three specific milestones for conventional loans:
- Borrower-requested cancellation at 80% LTV. Once your loan reaches 80% of the original home value, you can submit a written request to cancel PMI. The lender may require an appraisal (at your cost) to confirm the home has not declined in value.
- Automatic termination at 78% LTV. The lender must automatically terminate PMI when the loan reaches 78% of the original home value based on the original amortization schedule -- no request needed, no appraisal required. This is a legal right, not a courtesy.
- Midpoint cancellation. For a 30-year loan, PMI must terminate at the midpoint of the amortization (180 months) even if you have not reached 78% LTV. This protects borrowers who paid interest-only or had negative-amortization periods.
Example PMI Timeline: $400,000 Loan at 90% LTV
| Year | Loan Balance (End of Year) | LTV (Original Value) | Annual PMI Rate | Monthly PMI | Annual PMI Paid |
|---|---|---|---|---|---|
| 1 | $355,600 | 88.9% | 0.42% | $125 | $1,498 |
| 2 | $350,900 | 87.7% | 0.42% | $123 | $1,476 |
| 3 | $345,900 | 86.5% | 0.42% | $121 | $1,452 |
| 4 | $340,600 | 85.2% | 0.42% | $120 | $1,432 |
| 5 | $334,900 | 83.7% | 0.42% | $118 | $1,410 |
| 6 | $328,900 | 82.2% | 0.42% | $115 | $1,385 |
| ~7 | $322,400 | 80.6% | 0.42% | $113 | $1,358 |
| ~7 (mid) | $312,000 | 78.0% | -- | $0 | (auto-terminated) |
Assumptions: $400,000 home value at origination, $360,000 loan (90% LTV), 6.75% fixed interest rate, 30-year amortization, 740-759 FICO at origination, PMI rate fixed at 0.42% but applied to declining balance, automatic termination at 78% LTV per HPA 1998.
Notice the rate stays at 0.42% across all years -- the rate locked at closing. What changes is the dollar premium, because the loan balance is declining. The total PMI paid over the ~76-month period is approximately $8,938, terminating in month 76 when the scheduled balance hits 78% of the $400,000 original value ($312,000).
Accelerating PMI Cancellation with Extra Principal Payments
You can shorten the PMI period by paying down principal faster than the scheduled amortization. Per Fannie Mae's Servicing Guide section B-8.1-04 (cancellation of conventional mortgage insurance), borrower-requested cancellation uses your current LTV based on the original property value, so making principal payments to reach 80% LTV faster gets you out of PMI sooner. For example, paying an extra $200 per month on the $400,000 loan above moves the 80% LTV cancellation point from approximately month 76 to month 50 -- saving roughly $2,900 in additional PMI premiums.
Calculation Formulas for Other PMI Types
Borrower-paid monthly PMI is the most common, but four other PMI structures exist, each with its own calculation method.
1. Single-Premium PMI (SPMI)
Single-premium PMI is paid upfront at closing as a lump sum, eliminating the monthly premium. The calculation is a one-time multiplication: SPMI Cost = Loan Amount × Single-Premium Factor. Single-premium factors typically run 1.5x to 4x the annual PMI rate, depending on insurer and LTV. For example, a $300,000 loan with a 0.62% annual BPMI rate might convert to a 1.75% single-premium factor, producing an upfront SPMI cost of $5,250. This is roughly equivalent to 2.5-3 years of monthly PMI -- a discount versus paying monthly to natural cancellation, but a loss if you refinance early.
2. Split-Premium PMI
Split-premium PMI charges a smaller upfront premium at closing PLUS a reduced monthly premium. The split is typically 60/40 (60% of total cost upfront, 40% monthly) or 50/50. The math: Upfront Portion = Loan Amount × Split Factor, then Reduced Monthly = (Loan Balance × Reduced Annual Rate) ÷ 12. Split-premium is rarely the optimal choice mathematically; it's primarily a marketing structure that lowers the monthly payment but adds closing costs.
3. Lender-Paid Mortgage Insurance (LPMI)
With LPMI, the lender pays the PMI premium on your behalf in exchange for a higher mortgage interest rate -- typically 0.25 to 0.75 percentage points higher. There is no separate PMI line item; the cost is embedded in the rate. The "calculation" is therefore the interest-rate differential. Important: LPMI is not cancellable. You pay the higher rate for the entire loan life unless you refinance. This makes LPMI a poor choice if you expect to reach 80% LTV within 5-7 years.
4. FHA Mortgage Insurance Premium (MIP)
FHA loans do not have "PMI" technically -- they have Mortgage Insurance Premium (MIP), which uses a different formula. Per HUD's MIP guidance (opens in new tab), FHA MIP has two components: an upfront premium of 1.75% of the loan amount (financed into the loan or paid at closing) AND an annual premium between 0.15% and 0.75% based on loan amount, LTV, and term. For example, a $300,000 FHA loan at 96.5% LTV with a 30-year term has an upfront MIP of $5,250 (1.75%) AND an annual MIP of 0.55%, producing a monthly MIP of ($300,000 × 0.0055) / 12 = $137.50 per month. Unlike PMI, FHA MIP cannot be cancelled by reaching 80% LTV; for loans with less than 10% down, MIP lasts the entire life of the loan unless refinanced.
| PMI Type | Calculation Formula | Typical Cost on $300K Loan | Cancellable? |
|---|---|---|---|
| BPMI (Monthly) | (Balance × Annual Rate) ÷ 12 | $155/mo (0.62%) | Yes, at 78% LTV |
| SPMI (Single) | Loan Amount × SP Factor (one-time) | $5,250 upfront | No (paid) |
| Split-Premium | Upfront % + Reduced Monthly | $3,000 + $75/mo | Yes, monthly portion |
| LPMI | Embedded as +0.25%-0.75% interest rate | ~$80/mo (rate diff) | No (only by refi) |
| FHA MIP | 1.75% upfront + 0.15%-0.75% annual | $5,250 + $137/mo | No for <10% down |
How to Verify Your Lender's PMI Quote
The PMI on your Loan Estimate (LE) and Closing Disclosure (CD) is one of the few line items you can independently verify. Lenders sometimes pull the wrong LTV band, use a stale rate sheet, or fail to apply a credit-score-tier improvement. Here's the verification protocol.
Step 1: Confirm Your LTV Band
Your LTV is loan amount divided by purchase price (or appraised value, whichever is lower). Round to two decimal places, then look at the band boundaries: 80.01-85%, 85.01-90%, 90.01-95%, 95.01-97%. A loan at exactly 90.00% LTV is in the 85.01-90% band, not the 90.01-95% band. This boundary matters because the rate jump between bands is 30-50%.
Step 2: Confirm Your Credit Score Tier
The mortgage industry typically uses the middle score of the three FICO scores (Experian, Equifax, TransUnion) from a tri-merge report pulled by the lender. If you have a 745, 738, and 762, your applicable FICO is 745 -- placing you in the 740-759 tier. If you are within 5 points of a tier boundary, ask the lender to re-pull credit if any recent positive activity (paid-down balances, removed errors) would push you above the threshold.
Step 3: Pull the Insurer's Public Rate Card
Each U.S. mortgage insurer publishes its rate card publicly. Ask your lender which insurer is providing your PMI, then go to that insurer's website:
- MGIC Rates (opens in new tab)
- Radian Rates (opens in new tab)
- Essent Pricing (opens in new tab)
- Arch MI RateFinder (opens in new tab)
- Enact (formerly Genworth) Rates (opens in new tab)
- National MI Rates (opens in new tab)
Step 4: Recalculate
Take the base rate from the rate card, apply any rate adjustments for ARM, cash-out, or DTI, multiply by your loan amount, divide by 12. Compare to the PMI line on your Loan Estimate. If the difference exceeds $10/month, the lender owes you an explanation.
Step 5: If Disagreement, File a Complaint
If your lender refuses to disclose the rate card or fails to explain a material discrepancy, you have two avenues. First, submit a complaint to the CFPB at consumerfinance.gov/complaint (opens in new tab). The CFPB requires lenders to respond within 15 days. Second, contact your state's mortgage regulator -- in most states, mortgage lenders are licensed by the state Department of Financial Services or equivalent agency.
Most Common PMI Quote Errors
- Wrong LTV band. A loan at 90.00% LTV is in the 85.01-90% band; some lenders incorrectly push it into the 90.01-95% band.
- Using the lowest of the three credit scores instead of the middle score, inflating the PMI rate by one tier.
- Applying the cash-out adjustment to a purchase loan. Cash-out refis carry +15-50 bps; purchases should not.
- Failing to apply HomeReady/Home Possible discounts. Fannie's HomeReady and Freddie's Home Possible programs may discount PMI by 20-40 bps for eligible borrowers.
- Not removing the DTI adjustment after debt paydown. If you paid off a car loan between application and closing, your DTI may have dropped below 45%, eliminating the adjustment.
PMI Calculation Cheat Sheet by Loan Amount
For a quick reference, here are the monthly PMI premiums across common loan amounts and PMI rates. Multiply across to estimate your premium without running the full formula.
| Loan Amount | PMI 0.30% | PMI 0.55% | PMI 0.75% | PMI 1.00% | PMI 1.25% | PMI 1.50% |
|---|---|---|---|---|---|---|
| $150,000 | $38 | $69 | $94 | $125 | $156 | $188 |
| $200,000 | $50 | $92 | $125 | $167 | $208 | $250 |
| $250,000 | $63 | $115 | $156 | $208 | $260 | $313 |
| $300,000 | $75 | $138 | $188 | $250 | $313 | $375 |
| $400,000 | $100 | $183 | $250 | $333 | $417 | $500 |
| $500,000 | $125 | $229 | $313 | $417 | $521 | $625 |
| $600,000 | $150 | $275 | $375 | $500 | $625 | $750 |
| $750,000 | $188 | $344 | $469 | $625 | $781 | $938 |
Each cell shows the monthly PMI premium calculated as (Loan Amount × PMI Rate) / 12. For your specific scenario, identify your loan amount on the left, your PMI rate at the top, and read the intersection.
When Refinancing Re-Calculates Your PMI
Refinancing your mortgage triggers a full PMI recalculation using your current LTV, current credit score, and the prevailing rate matrix at the time of the refi. This can be either a major savings or a major cost depending on the inputs.
Scenario A: PMI Drops to Zero After Refinance
If your home value has appreciated such that your new LTV (refinance loan amount / current appraised value) is at or below 80%, PMI is not required on the new loan. This is the classic "appreciation refinance" play: even if your original loan still has PMI, the refi extinguishes it entirely.
Scenario B: PMI Drops Materially Due to Better Credit Score
If your credit score has improved from 680 to 760 since the original loan, refinancing puts you into the 760+ tier on the new rate matrix. Even at the same LTV, this can drop the PMI rate by 50%+ (for example, from 0.78% to 0.31% in the 85.01-90% band).
Scenario C: PMI Increases Despite Refinance
If your home value declined (lowering the LTV improvement you expected) or the new rate matrix is higher than the old one (insurer industry-wide repricing), your new PMI could be higher than your existing one. According to Freddie Mac's industry research (opens in new tab), mortgage insurer rate sheets repriced upward in 2022-2023 following Federal Reserve rate hikes, then partially declined in 2024-2025. Always compare the new PMI quote against the old before committing to refinance.
Refinance Break-Even Math
To evaluate whether a refinance pays back its PMI savings, calculate:
Break-Even Months = Refi Closing Costs ÷ (Old Monthly PMI - New Monthly PMI)
If the break-even is under 24 months, the refinance pays back quickly. For a deeper look at the full refinance break-even calculation including interest-rate changes, see our mortgage refinance break-even guide.
Frequently Asked Questions
PMI is calculated by multiplying your loan balance by an annual PMI rate, then dividing by 12 for a monthly premium. The formula is: Monthly PMI = (Loan Balance × Annual PMI Rate) ÷ 12. The annual PMI rate is set by the mortgage insurer based on your loan-to-value (LTV) ratio, credit score, loan type, and debt-to-income ratio, and typically ranges from 0.19% to 2.25% in 2026. For example, a $300,000 loan at a 0.62% PMI rate has a monthly PMI premium of ($300,000 × 0.0062) ÷ 12 = $155 per month.
The average PMI rate in 2026 ranges from 0.5% to 1.5% of the loan amount annually, with most borrowers paying 0.6% to 0.9%. The exact rate depends on your LTV and credit score. A borrower with 740+ credit score and 10% down typically sees a rate around 0.42%, while a 660 credit score borrower with 5% down may pay 1.10% or higher. PMI rates are published in rate cards by the six major U.S. mortgage insurers: MGIC, Radian, Essent, Arch, Enact (formerly Genworth), and National MI.
The standard PMI formula is: Monthly PMI Premium = (Current Loan Balance × Annual PMI Rate) ÷ 12. The annual PMI rate is expressed as a decimal (for example, 0.0062 for 0.62%). The current loan balance, not the original loan amount, is the figure most lenders use, though some lenders fix the premium at the original balance for the entire loan term. The result is the dollar amount added to your monthly mortgage payment alongside principal, interest, taxes, and homeowners insurance (PITI).
On a $400,000 mortgage, PMI typically costs between $1,200 and $6,000 per year, or $100 to $500 per month. The exact figure depends on your LTV and credit score. With 10% down ($40,000), a 760 credit score borrower might pay 0.31% annually, or about $103 per month. With 5% down ($20,000) and a 680 credit score, the rate could climb to 0.96%, producing a monthly premium of around $304. The total cost over the life of the PMI depends on when the loan reaches the 78% LTV automatic-termination threshold under the Homeowners Protection Act of 1998.
It depends on your lender's policy. Most lenders use a declining-balance approach where PMI is recalculated annually based on the current loan balance, so your premium gradually drops as you pay down principal. Some lenders use a constant-premium approach where the monthly PMI stays fixed at the original loan amount until cancellation. Either way, you have the right under the Homeowners Protection Act to request PMI cancellation once the loan reaches 80% loan-to-value based on the original purchase price, and the lender must automatically terminate PMI when the loan reaches 78% LTV on its scheduled amortization.
Your PMI rate is set by the mortgage insurer using a rate matrix combining four primary factors: (1) loan-to-value ratio (LTV) -- 95.01-97% LTV pays the highest rates, 80.01-85% LTV pays the lowest; (2) FICO credit score -- 760+ borrowers get the best rates, sub-680 borrowers pay 2-3x more; (3) loan type -- 30-year fixed, 15-year fixed, ARM, and cash-out refinance each have different rate sheets; and (4) debt-to-income ratio (DTI) -- DTI over 45% adds 10-30 basis points. Mortgage insurer rate cards are public; you can request the underwriting matrix from your lender to verify the quoted rate.
PMI is quoted as an annual rate but paid monthly. The annual rate is multiplied by your loan balance, then divided by 12 to produce the monthly premium added to your mortgage payment. For example, a 0.75% annual PMI rate on a $250,000 loan produces an annual premium of $1,875, paid as $156.25 per month. There are also single-premium PMI structures where the entire PMI cost is paid upfront at closing as a one-time lump sum, but the standard monthly-paid PMI (BPMI) is far more common in 2026.
FHA Mortgage Insurance Premium (MIP) uses a two-part formula. There is an upfront MIP of 1.75% of the loan amount paid at closing or financed into the loan, PLUS an annual MIP of 0.15%-0.75% paid monthly (annual rate divided by 12). The annual MIP rate depends on loan amount, LTV, and term per HUD's MIP rate schedule. Unlike conventional PMI, FHA MIP cannot be cancelled by reaching 80% LTV on most modern FHA loans -- for loans originated after June 2013 with less than 10% down, MIP lasts the entire life of the loan unless you refinance into a conventional mortgage.
Your Next Steps
- Find your LTV. Divide your loan amount by your home's purchase price (or appraised value, whichever is lower). Match it against the four LTV bands: 80.01-85%, 85.01-90%, 90.01-95%, 95.01-97%.
- Pull your three credit scores. Use AnnualCreditReport.com (opens in new tab) for free pulls of all three bureaus -- the middle score is what mortgage lenders use.
- Find your annual PMI rate on the matrix in Section 3, then verify against the public rate card of your lender's mortgage insurer (Section 8 has the links).
- Apply the formula: (Loan Balance × PMI Rate) ÷ 12. Compare to the PMI line on your Loan Estimate. Discrepancies over $10/month warrant an explanation.
- Run the full mortgage payment with PMI included in our mortgage calculator to see your complete PITI breakdown.
- Plan your cancellation strategy: calculate the month you'll hit 80% LTV (request cancellation) and 78% LTV (automatic termination). Consider extra principal payments to accelerate.
Calculate Your Mortgage Payment with PMI
See the full picture: principal, interest, taxes, insurance, AND PMI in one monthly payment. Our mortgage calculator lets you adjust down payment, credit score tier, and PMI rate to test scenarios -- and shows the exact month PMI cancels.
Sources
- Consumer Financial Protection Bureau - What Is Private Mortgage Insurance? (opens in new tab)
- U.S. Government Publishing Office - Homeowners Protection Act of 1998 (Public Law 105-216) (opens in new tab)
- U.S. Department of Housing and Urban Development - FHA Mortgage Insurance Premium Rates (opens in new tab)
- Federal Housing Finance Agency - PMI Coverage Requirements (opens in new tab)
- Freddie Mac - Industry Research and Mortgage Market Reports (opens in new tab)
- Fannie Mae - Servicing Guide (Section B-8.1-04, Cancellation of Conventional Mortgage Insurance) (opens in new tab)
- Urban Institute - The Rate of Private Mortgage Insurance (opens in new tab)
- Federal Reserve - Working Paper on Mortgage Insurance Pricing (opens in new tab)
- National Association of Realtors - Existing-Home Sales and Median Price Data (opens in new tab)
- MGIC - National Rate Card (opens in new tab)
- Radian - Mortgage Insurance Rates (opens in new tab)
- Essent - Mortgage Insurance Pricing (opens in new tab)
- Consumer Financial Protection Bureau - File a Consumer Complaint (opens in new tab)
Important Disclaimer
Disclaimer: This content is for educational and informational purposes only and does not constitute financial, tax, or legal advice. PMI rates, lender policies, mortgage insurer pricing matrices, and consumer protections vary by state, lender, loan type, and individual credit profile. The example calculations in this guide are illustrative and use composite rate matrices; actual rates and payments quoted by lenders will differ. Individual circumstances vary, and you should consult with a qualified mortgage professional, real-estate attorney, or HUD-approved housing counselor before making home-financing decisions. We do not endorse any specific lender, mortgage insurer, or financial product. While we strive for accuracy, laws, regulations, and market conditions change frequently. Rate data and policy references current as of May 2026.
Content reviewed by the Digital Calculator Team. Learn more about our accuracy standards.