How much is PMI?

Find out how much this cost impacts your monthly mortgage payment

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Among the numerous acronyms you’ll hear when taking out a mortgage, PMI is one you’ll definitely want to pay attention to. It stands for private mortgage insurance, and it’s a fee the lender tacks on if you take out a conventional loan with less than a 20% down payment to help offset its risk to buyers with lower down payments.

PMI goes directly to the lender as you pay it each month. It can tack on hundreds of dollars to your monthly mortgage payment and doesn’t help you build any equity. Before you take out a conventional loan, finding out how much the PMI is can help you prepare for the added expense and move forward with your home purchase.

Key insights

  • Lenders require conventional loan borrowers with less than 20% down to pay PMI.
  • The typical cost of PMI is 0.5% to 1% of the overall loan amount per year, but it can cost even more depending on several factors.
  • Several factors impact the amount of PMI you’ll pay, including your credit score.

How much does private mortgage insurance cost?

You’ll see PMI calculated as a percentage of the loan amount, with its cost typically averaging 0.5% to 1% of the overall cost of the loan. However, you’ll find some instances of it as high as 6%. Many factors impact the PMI cost, too, including the loan-to-value ratio (LTV), borrowing amount, credit score and the type of loan.

While the cost of PMI can feel like an added burden, it does provide a way for potential homebuyers to purchase a home when they don’t have the full 20% for a down payment. Plus, you won’t have to always pay PMI. “Generally, if you’re making a down payment of less than 20%, you can anticipate paying PMI until your loan-to-value ratio reaches a certain threshold, which is typically around 80%,” explained Ron Goforth, senior vice president of mortgage at PNC Bank.


PMI and mortgage insurance premiums (MIP) have similar-sounding acronyms, but they’re different as they relate to mortgage insurance. You can expect to pay PMI on a conventional loan if your down payment is less than 20%. However, no matter how much you put down for an FHA loan, you will need to pay MIP. Your PMI payments can be removed once you’ve reached 20% equity with the loan, and MIPs often require an upfront fee along with monthly payments.

» MORE: How to save for a down payment

How to calculate PMI

You can calculate PMI for yourself or at least get an estimate of the cost, which can help you as you’re going through the homebuying process.

Start the calculation using the PMI percentage the lender provided and multiply it by your total loan amount. If you’re refinancing, use your current loan balance as the total amount. If you don’t know the PMI percentage yet, you can calculate it using an estimated percentage on the low end and one on the higher end, such as 0.5% and 2%. That way, you can give yourself a range.

Once you calculate the total annual premium, simply divide it by 12 to figure out the amount of the monthly PMI cost.

For example, if your loan amount is $300,000 after your down payment and the lender tells you the PMI percentage is 1%, multiply $300,000 by 1%, which is $3,000. This is your annual premium. Now, divide $3,000 by 12. You’ll see your monthly PMI payment is $250.

“To get a more accurate estimate of your PMI costs, it’s best to consult your lender, as they can provide tailored information based on your unique financial situation and loan terms,” Goforth said.

How credit scores affect PMI

The higher your credit score is, the lower your PMI percentage, and vice versa.

One of the factors impacting the cost of PMI is your credit score. For example, a borrower with a credit score of 740 or higher (which falls under the “excellent” range) may pay 0.3% PMI versus a borrower with a fair credit score of 660, who can end up paying 1.5% PMI. Since credit score greatly impacts the overall cost of PMI, it may be worth it to work on improving your credit score as much as possible before applying for a loan.

» MORE: What credit score is needed to buy a house?

View rates from leading lenders now.


    What affects PMI rates?

    A few factors impact how much you pay for PMI rates, including the amount borrowed from the lender and your credit score. PMI is typically higher for larger loan amounts. The higher your credit score, the lower the percentage rate of PMI. If you want a breakdown of the exact PMI costs, you can request the percentage information from the lender. The type of loan you have also impacts how much PMI you end up paying.

    How can I avoid paying PMI?

    You have a few options to avoid paying PMI. You can put down a 20% down payment or more at closing. If you’ve already closed on your property, you can pay the balance of your current mortgage so your LTV ratio becomes less than 80%. You can also purchase a higher-interest-rate mortgage or refinance into one, which some lenders offer in lieu of a mortgage with PMI.

    When can I drop PMI?

    With conventional loans, you can request the lender or loan servicer cancel the PMI on the date the principal balance on your mortgage drops to 80% of the original value of your home. You can find this date on the PMI disclosure form from closing or contact the loan servicer for detailed information.

    Bottom line

    PMI is one way lenders reduce their risk of lending to borrowers who pay less than 20% down with a conventional loan. The cost of PMI is typically 0.5% to 1% of the overall loan amount, but it can go as high as 6%. You can calculate the PMI amount yourself; however, the lender should provide details with a PMI disclosure form.

    Understanding the PMI amount upfront can help you estimate your monthly mortgage obligation.

    “Remember that while PMI adds to your monthly expenses, it does allow you to purchase a home with a smaller down payment and keep more in savings,” Goforth said.

    Article sources

    ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:

    1. Consumer Financial Protection Bureau, “What is mortgage insurance and how does it work?” Accessed Feb. 13, 2024.
    2. Texas Department of Insurance, “Private Mortgage Insurance (PMI).” Accessed Feb. 13, 2024.
    3. U.S. Department of Housing and Urban Development, “Single Family Upfront Mortgage Insurance Premium (MIP).” Accessed Feb. 13, 2024.
    4. Industrial Federal Credit Union, “How PMI and Credit Scores Are Linked.” Accessed Feb. 13, 2024.
    5. Consumer Financial Protection Bureau, “When can I remove private mortgage insurance (PMI) from my loan?” Accessed Feb. 13, 2024.
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