How to Calculate PMI: Cost, Drop Date & Total Paid

What PMI is

PMI — private mortgage insurance — is what a lender charges when a conventional mortgage starts with less than 20% down. It protects the lender, not you: if you stop paying and the home sells for less than the loan, the insurance covers the lender’s loss. PMI usually costs 0.3% to 1.5% of the loan per year, and the premium is charged on the original loan amount, so it stays flat even as the balance falls. Every figure here is checked against the PMI calculator.

The PMI formula

The formula in one line: monthly PMI = loan amount × annual PMI rate ÷ 12. The loan amount is the home price minus the down payment. The total PMI is the monthly PMI × the number of months until the balance falls to 80% of the home’s value. The monthly mortgage payment is what shrinks the balance, so the drop date comes from the amortization schedule, not from the PMI rate.

Step 1: Work out your loan amount (price minus down payment)

Subtract the down payment from the home price. On a $400,000 home with 10% down, the down payment is $40,000 and the loan is $360,000. That $360,000 is the amount the PMI rate applies to. A bigger down payment means a smaller loan, a smaller monthly PMI, and a shorter wait before the balance hits 80% of the home’s value.

Step 2: Find your annual PMI rate

Find your annual PMI rate, quoted as a percentage of the loan per year. This guide uses 0.85%, in the middle of the usual 0.3% to 1.5% range. The rate depends on your down payment, your credit score, and the lender — a smaller down payment or a lower score usually means a higher rate. The mortgage rates by credit score chart shows what rate your score earns.

Step 3: Divide by 12 for the monthly PMI

Divide the annual PMI by 12 to get the monthly premium. On a $360,000 loan at 0.85% a year, the annual PMI is $3,060.00, and $3,060.00 ÷ 12 is $255.00 a month. The monthly PMI stays at $255.00 until it drops off — it does not shrink as the balance falls.

Step 4: Work out your monthly mortgage payment

Work out the monthly principal-and-interest payment, because that is what pays the balance down. The formula is M = L × r ÷ (1 − (1 + r)^−n), where L is the loan, r is the monthly rate (APR ÷ 12), and n is the number of payments. On a $360,000 loan at 6.5% APR over 30 years, r is 0.5417% a month and n is 360, giving a monthly P&I payment of $2,275.44. Add the PMI and the total monthly payment is $2,530.44.

Step 5: Find when the balance hits 80% of the home's value

Find when the loan balance falls to 80% of the home’s value. Eighty percent of $400,000 is $320,000. After 94 monthly payments the balance is $320,248.50, still above the target; after 95 payments it is $319,707.73, below it. So PMI runs for 95 months. With the mortgage starting in October 2026, the 95th payment lands in September 2034 — that is the drop date. You can ask the lender to drop PMI at 80% of the home’s original value, and it drops automatically at 78% under the Homeowners Protection Act.

Step 6: Multiply the monthly PMI by the months to get the total

Multiply the monthly PMI by the number of months to get the total PMI. Here that is $255.00 × 95 months = $24,225.00 — the full cost of PMI on this mortgage. A bigger down payment cuts both numbers: with 15% down the monthly PMI is $240.83 and it lasts 56 months, for a total of $13,486.67. With only 5% down the monthly PMI is $269.17 and it lasts 124 months, for a total of $33,376.67.

Worked example

Put the six steps together for a $400,000 home, 10% down, 6.5% APR, 30 years, and a 0.85% PMI rate. Down payment $40,000.00; loan $360,000.00; monthly PMI $255.00/month PMI; monthly P&I $2,275.44/month P&I; total monthly $2,530.44 total monthly; 95 months; drop date September 2034 drop date; total PMI $24,225.00 total PMI. Note that totals are computed from unrounded values, so rounded parts may differ by a cent from their rounded sum.

When there is no PMI at all

With 20% down there is no PMI at all — the monthly PMI is $0.00, for 0 months, and the total is $0.00, while the monthly P&I is $2,022.62. That is $80,000 down on a $400,000 home. And at 0% APR the balance falls in equal steps of $1,000.00 a month, so PMI lasts 40 months for a $10,200.00 total PMI, with the drop in February 2030.

Working backwards

The calculation also runs in reverse. To pay $250.00/month PMI, the down payment on a $400,000 home at 0.85% is $47,058.82 — 11.7647% of the price. One dollar less down, $47,057.82, still rounds to a monthly PMI of $250.00, because this reverse is exact, not a step. And for a $25,000.00 total PMI over 95 months, the rate is 0.8772%. At the displayed rate of 0.88% the total is $25,080.00; at 0.87% it is $24,795.00. For a monthly PMI of exactly $300.00 the rate is 1.0000%: at 0.99% it is $297.00, and at 1.01% it is $303.00.

What the calculation leaves out

Five things this calculation leaves out. First, PMI protects the lender, not you — it does not insure you or the home. Second, some lenders offer lender-paid PMI, where the lender pays the premium and charges a higher rate instead; the cost is still there, just hidden in the rate. Third, FHA loans use MIP, not PMI, and MIP follows different rules — it does not drop the same way, and on many FHA loans it lasts for the life of the loan. Fourth, if the home appreciates, a new appraisal can end PMI sooner, because the balance is then compared with a higher value. Fifth, taxes and homeowners insurance escrow are not included — the $2,530.44 total monthly here is principal, interest, and PMI only. For what rate your score earns, see the mortgage rates by credit score chart.

What to do next

Run your own numbers through the PMI calculator: try your home price, your down payment, and your PMI rate, then work backwards from your monthly PMI goal.