How PMI is calculated
PMI is usually quoted as an annual percentage of the loan amount and paid monthly with your mortgage:
Monthly PMI = loan amount × annual PMI rate ÷ 12
The rate depends mainly on your down payment and credit score. Freddie Mac estimates that borrowers pay approximately $30 to $70 a month for every $100,000 borrowed, which works out to about 0.36% to 0.84% a year. The calculator shows that range for your loan next to your own rate.
When PMI ends
The Homeowners Protection Act gives you two dates, both measured against the home’s original value (the lower of the purchase price or appraisal):
- 80% LTV — you can ask to cancel. You may request cancellation when your balance is scheduled to reach 80%, or earlier if extra payments get you there. Lenders can require a good payment history and proof the home has not lost value.
- 78% LTV — it ends automatically on the date the balance is scheduled to reach 78%, provided you are current on payments.
- Midpoint — if neither has happened, PMI must end the month after the loan’s midpoint (15 years on a 30-year loan).
Worked example
A $350,000 home with 5% down ($332,500 loan, 95% LTV) at 6.5% for 30 years with PMI at 0.6% a year:
| Monthly PMI (332,500 × 0.6% ÷ 12) | $166.25 |
|---|---|
| Freddie Mac range for this loan | $99.75 – $232.75 |
| Request cancellation (80% LTV) | 10 years 4 months |
| Automatic termination (78% LTV) | 11 years 3 months |
| Total PMI to automatic termination | $22,444 |
Adding extra principal each month brings both dates forward — try it with the extra payment field.
Ways to avoid or shorten PMI
- Put 20% down, or use a piggyback second mortgage (compare the total cost carefully).
- Pay extra principal to reach 80% sooner, then request cancellation in writing.
- If your home has risen in value, ask your servicer about cancellation based on a new appraisal; policies vary.
- FHA loans use a different system (MIP) with different removal rules — see the FHA loan calculator.
Frequently asked questions
Is PMI tax deductible?
Tax treatment of mortgage insurance premiums has changed several times. Check the current IRS rules or ask a tax professional for your situation.
Does PMI apply to FHA or VA loans?
No. FHA loans have mortgage insurance premiums (MIP) set by HUD, and VA loans have a funding fee instead of monthly mortgage insurance.
Can I cancel PMI if my home value went up?
The automatic rules use the original value. Many servicers allow cancellation based on a new appraisal, but that is their policy rather than a legal right.